May 14, 2020

The Forward View – Global: May 2020

A massive contraction in global activity has occurred due to COVID-19.

Our podcast series to accompany the NAB Forward View – Global continues, giving you a 10 minute summary of our key forecasts this month. Listen now.


  • We have revised down our forecasts for global GDP and now expect -3.8% in 2020 (was -2.8%) and +6.5% in 2021 (was 6.6%), reflecting some further escalation of containment measures (notably Japan) and only a gradual easing of restrictions in other economies, coupled with ongoing household and business caution.
  • The forecast changes don’t alter the overall picture – there has been a huge fall in activity across most of the world; in China it was centred in February but in many other economies it occurred over March/April. The fall in global GDP in 2020 is likely to be the biggest fall in since least since the 1950s, and most likely since the Great Depression.
  • Global activity likely hit bottom in April; many countries have, or are in the process of, easing containment restrictions even if only gradually. While an easing in containment measures – if sustained  – will likely lead to a bounce in activity, a full recovery from the downturn is likely to take an extended period of time for many. This is due to the damage to household/business balance sheets, as well as to government finances, the closures of many firms being permanent, and long-lasting structural changes to economies. Moreover, there are a range of risks that may slow or reverse any recovery, including that of further major outbreaks of COVID-19, financial market stress (with some EMs at risk of de-stabilising capital outflows), or a flare-up in geo-political tensions.
  • The extent and speed of the decline in activity is highlighted by the US labour market. In February, the unemployment rate was at a 50 year low – two months later it is at its highest level since the series began (1948). Similarly, Canada’s unemployment rate jumped to 13%. For other countries – such as Germany –  government wage subsidy schemes have minimised the jump in measured unemployment, but this only hides the extent to which there are a lot of people who were meaningfully employed a few months ago doing relatively little (although by retaining a link to work such schemes may assist the recovery).

For further details, please see The Forward View – Global May 2020