February 14, 2020

NAB’s World on Two Pages: February 2020

We have revised down our forecasts for global growth in 2020 to 3.0%. While in Australia we now expect a small negative for Q1 2020 growth.


The Coronavirus outbreak that emerged in January – centred on China, the world’s largest economy – is likely to lead a major shift down in global growth with the impact concentrated in the East Asia region. The result in Q1 is expected to be the weakest rate of growth (in year-on-year terms) since the Global Financial Crisis, and the Chinese economy is expected to show no growth (compared with an increase of 1.5% q/q in Q4). As a result, we have revised down our forecasts for global growth in 2020. For the full year, we forecast global growth of 3.0% (3.2% previously) but with a recovery in 2021 to around 3.5%. This outlook is predicated on a relatively short (single quarter) disruption in activity followed by a recovery in Q2; a ‘best-case’ scenario. However, it is highly uncertain how long the virus will continue to spread and the containment measures remain in place. Should it prove to be a prolonged period, this would add significant additional downside risk to our forecasts. The Coronavirus struck when the global economy, while still fragile, was in slightly better shape with underlying momentum stronger than for much of 2019. Importantly, this also applied to India which had been seriously underperforming. Moreover, there had been some alleviation in trade policy headwinds with the US-China Phase One trade deal and USMCA ratification almost complete.

This month we recorded a podcast to accompany the Forward View – Global, giving you a short summary of our key forecasts. Listen now.



Private demand remained very weak at the end of 2019 and we expect very modest growth in Q4 – mainly due to net exports and public spending. Onto that weak base we have attempted an early view on what bushfires and the Coronavirus might do to the forecasts. We now expect a small negative for Q1 2020 growth, driven by weaker consumption and a hit to tourism, education, commodity prices and incomes. It also seems likely that wage growth momentum eased into late 2019/early 2020. While we assume that most of the negative impacts from the virus and bushfires have passed by Q2 this still could see y/y growth to Q2 2020 slow to around 1%. By H2 2020, we expect that rebuild effects from bushfires start to cut in and stabilise the dwelling cycle – with investment in dwellings strengthening markedly in 2021. By then lower rates should have boosted household balance sheets and consumption and, hopefully, business investment. We have lowered our previous GDP forecasts by around ½% in 2020 to around 1.5% but boosted 2021 by around 0.3% to 2¾%. We still expect the labour market to weaken with the unemployment rate expected to reach 5.5% in H2 2020. Reflecting these factors, and subdued inflation, we still expect two more cuts – the first in April and another by around mid-year, and there is a risk of a move to ‘unconventional’ policy in H2 2020.

Our podcast series to accompany the NAB Forward View – Australia continued this month, giving you a short summary of our key forecasts.
Listen now.


Find out more in NAB’s world on two pages February 2020.