Global recession more likely as COVID spread prolongs disruption

MANILA, Philippines — A global recession is now becoming more likely as the rising number of cases of COVID-19 worldwide lead to greater disruption and aggressive market selloff, Oxford Economics said.

The still slow normalization of businesses in China also suggests that this will be an even bigger drag on global growth than what was expected in the first quarter of the year.

“Developments over the past week have greatly increased the likelihood that the global economy is moving into recession in response to the surge in COVID-19 cases worldwide, the associated disruption, and the aggressive market sell-off,” the think tank said in a new research brief.

“It also suggests that the economic costs elsewhere associated with shutdown, other less stringent measures, and voluntary forms of social distancing will be substantial.”

The research firm said that while the tough measures implemented by China to contain the spread of coronavirus have so far been successful, the country will be reeling from a high economic cost as seen in the 13.5 percent plunge in industrial value year-on-year in January and February combined, as well as the 20.5 percent fall in retail sales during the same period.

“The dismal Chinese activity data for February and the continued slow return to business as usual suggest that China will be an even bigger drag on global GDP growth than we had previously expected in Q1,” said Oxford Economics.