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Expect a strong economic rebound, says leading forecaster


The economic earthquake that is coronavirus continues to escalate, but however faint right now, there is light at the end of the tunnel, says one of the world’s leading independent advisory firms.

In its latest analysis of COVID-19 and its effects on global markets, Oxford Economics said that while there will be a lot of short term pain for industries during the pandemic, an eventual rebound will be strong. 

 

“Attention is understandably focused on limiting the damage from the short-term effects of the coronavirus outbreak,” the UK-based firm said. 

  

 

“But it’s likely that, once disruption and uncertainty fade, the rebound in global economic activity will be strong. It’s important for firms to position themselves for such a recovery.” 

 

According to Oxford Economics, historical evidence supports this view, and is reflected in its baseline forecast and scenario analysis. 

 

“In the past 200 years, short recessions have typically been followed by robust recovery,” it said.

 

“Long-term impacts from natural disasters have generally only been evident for specific hazards. With the notable exception of AIDS, longer-term pandemic effects also appear to have been contained.”  

 

Oxford says that polls taken during the 2003 SARS and 2009 influenza outbreaks flag an explanation for limited impacts.

 

“Public fears increased alongside rising infection rates, but they dissipated promptly as outbreaks came under control,” it explained.     

 

“In our coronavirus pandemic scenario, global growth grinds to a halt in Q2 2020 as the world economy succumbs to recession, but it then rebounds to a rapid 5% pace of expansion within a year.” 

 

“With much of the initial output loss recovered in a relatively short period of time, long-term impacts are limited.”  

 

But Oxford Economics says that disruption could still be longer than expected, while surveys highlight possible longer lasting risks in some countries.  

 

“Moreover, coronavirus-related weakness and associated financial distress could expose other key vulnerabilities – for example related to deteriorating corporate sector balance sheets and fragile trade relations.” 

 

“These would be expected to have persistent effects on global activity over the coming years.”

 

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Written by: Mark Harada
Published: 27 March 2020


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