Increasing Global Economic Collapse and ‘Distress of Nations’; Covid-19 dealt a shock to the world’s top economies. Here’s who has fared the worst
By Julia Horowitz, CNN Business Updated 10:34 AM ET, Fri August 28, 2020
London (CNN Business) The world’s top developed economies are all officially in a recession. What happens next is far from certain.
On Friday, Canada joined France, Germany, Italy, Japan, the United Kingdom and the United States in reporting that its economy shrank dramatically in the first half of 2020 due to the pandemic. Canadian economic output shrank by 11.5% between April and June, the sharpest decline in records dating back to 1961.
Now, six months after the coronavirus outbreak began to accelerate rapidly outside China, it’s increasingly clear that countries will not bounce back in tandem. The impact of the virus, public health policy and stimulus measures are creating divergent paths forward, with ramifications that could last years.
“It’s the path of the virus and the vaccine that’s critical to the recovery story,” said James Knightley, ING’s chief international economist.
While Covid-19 delivered a brutal hit to every country’s economy, the magnitude of the shock has varied significantly across the globe.
The United Kingdom has fared the worst of any of its big global peers, with its economy shrinking by more than a fifth between April and June.
Ben May, director of global macro research at Oxford Economics, attributes this weakness in part to statistical factors, including how the government accounts for inflation. But he also pointed to the importance of consumer spending to the British economy, which magnifies the effects of social distancing, as well as the UK government’s initial reluctance to impose strict quarantine measures.
“The UK government has been criticized for taking too long to lock down the economy and effectively allowing the pandemic to gain a stronger foothold in the country,” May said in a recent note to clients.
Even countries that locked down sooner than the United Kingdom have suffered dramatic economic slowdowns, with the number of coronavirus cases and government decisions on when to reopen offices and restaurants dictating the scale of damage.
While all G7 countries suffered their worst drop in GDP on record, France appears to have been knocked harder than Germany in part because of the extremely harsh quarantine it adopted in April, according to Berenberg Bank economist Florian Hense. And while Italy emerged as an epicenter of infections in March, its decision to impose restrictions on movement early may have set it up for a second quarter that was slightly less severe than feared.
Some parts of the US economy started reopening in May, which meant the decline was not as sharp as was first forecast. But this may just lead to a weaker July-to-September quarter, especially given that a spike in cases in Sun Belt states in June forced some local officials to reimpose restrictions late that month.
The Back-to-Normal Index from Moody’s Analytics and CNN Business shows that the US economy is operating at 78% of where it was in early March.
What comes next
The clear outlier among major economies is China, which catapulted into recovery mode in the second quarter following a drop in GDP between January and March, its worst performance over a three-month period in decades.
As the initial hub of the outbreak and the first in the world to impose draconian measures to try to control the spread of the virus, China was the first major economy to reopen. That’s given it a head start.
Where these countries go from here depends in large part on the virus and the race for a vaccine, Knightley said, with some economists warning of the potential for a double-dip recession in which output falls again.
They also caution that while a big rebound is expected in the third quarter, that may not dictate the long-term trajectory, despite huge injections of cash from central banks and massive increases in government spending.
A rapid increase in serious cases could prompt governments to reintroduce strict lockdown measures. That would slam consumer confidence for a second time, reduce spending and investment and throw the recovery off track.
Government relief efforts also have a vital role in determining where economies go next. In the United States, Democrats and Republicans still can’t agree on a fourth stimulus package. Though President Donald Trump took executive action to enhance jobless benefits in the absence of a deal, adding $300 per week to state unemployment checks, the lack of more comprehensive measures is a risk, according to Knightley.
The additional $600 per week that jobless Americans received until July served as a big boost to consumer spending. Even as unemployment skyrocketed, personal income in the United States rose 10.5% in April as the government provided extra support and cut $1,200 checks.
Strategists at Goldman Sachs estimate that the lapse in the $600 benefit will result in a $70 billion decline in personal income in August, hitting both consumer spending and retail sales. With consumer services driving roughly 70% of the US economy, that could create problems.
Germany, meanwhile, recently extended the length of its program that keeps workers on corporate payrolls by subsiding their wages through 2021.
Oxford Economics’ May said another crucial factor could be public faith in the government response. If people don’t trust government leaders to make decisions in their interest, it could keep a lid on spending, he said.
A Pew Research Center survey of 14 advanced economies released this week found that a majority of Americans and Brits did not think their country had done a good job dealing with Covid-19.
In His Service,
Night Watchman Ministries
Make Your Decision for Christ NOW!!!!!!! Time is Up!!!!!!!
Jesus Christ’s Offer of Salvation:
The ABCs of Salvation through Jesus Christ (the Lamb)
A. Admit/Acknowledge/Accept that you are sinner. Ask God’s forgiveness and repent of your sins.
. . . “For all have sinned, and come short of the glory of God.” (Romans 3:23).
. . . “As it is written, There is none righteous, no, not one.” (Romans 3:10).
. . . “If we say that we have no sin, we deceive ourselves, and the truth is not in us.” (1 John 1:8).
B. Believe Jesus is Lord. Believe that Jesus Christ is who He claimed to be; that He was both fully God and fully man and that we are saved through His death, burial, and resurrection. Put your trust in Him as your only hope of salvation. Become a son or daughter of God by receiving Christ.
. . . “That whosoever believeth in him should not perish, but have eternal life. For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life. For God sent not his son into the world to condemn the world; but that the world through him might be saved. (John 3:15-17). For whosoever shall call upon the name of the Lord shall be saved.” (Romans 10:13).
C. Call upon His name, Confess with your heart and with your lips that Jesus is your Lord and Savior.
. . . “That if thou shalt confess with thy mouth the Lord Jesus, and shalt believe in thine heart that God hath raised him from the dead, thou shalt be saved. For with the heart man believeth unto righteousness; and with the mouth confession is made unto salvation.” (Romans 10:9-10).
. . . “If we say that we have no sin, we deceive ourselves, and the truth is not in us. If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness. If we say that we have not sinned, we make him a liar, and his word is not in us.” (John 1:8-10).
. . . “And he is the propitiation for our sins: and not for ours only, but also for the sins of the whole world. (John 2:2).
. . . “In this was manifested the love of god toward us, because that God sent his only begotten Son into the world, that we might live through him. And we have seen and do testify that the Father sent the Son to be the Saviour of the world. Whosoever shall confess that Jesus is the Son of God, God dwelleth in him, and he in God.” (1 John 4:9, 14-15).
. . . “But God commendeth his love toward us, in that, while we were yet sinners, Christ died for us. Much more then, being now justified by his blood, we shall be saved from wrath through him. For if, when we were enemies, we were reconciled to God by the death of his Son, much more, being reconciled, we shall be saved by his life.” (Romans 5:8-10).
. . . “For the wages of sin is death; but the gift of God is eternal life through Jesus Christ our Lord.” (Romans 6:23).
. . . “Jesus saith unto them, I am the way, the truth, and the life, no man cometh unto the Father, but by me.” (John 14:6).
. . . “For I am not ashamed of the gospel of Christ: for it is the power of God unto salvation to everyone that believeth.” (Romans 1:16).
. . . “Neither is there salvation in any other: for there is none other name under heaven given among men, whereby we must be saved.” (Acts: 4:12).
. . . “Who will have all men to be saved, and to come unto the knowledge of the truth for there is one God, and one mediator between God and men, the man Christ Jesus.” (1 Timothy 2:4-6).
. . . “For God did not appoint us to suffer wrath but to receive salvation through our Lord Jesus Christ.” (1 Thessalonians 5:9).
. . . “But as many as received him, to them gave the power to become the sons of God, even to them that believe on his name.” (John 1:12).
True Church / Bride of Christ Spared from God’s Wrath:
Romans 5:8-10. “But God commendeth his love toward us, in that, while we were yet sinners, Christ died for us. Much more then, being now justified by his blood, we shall be saved from wrath through him. For if, when we were enemies, we were reconciled to God by the death of his Son, much more, being reconciled, we shall be saved by his life.”
Romans 12:19. Dearly beloved, avenge not yourselves, but rather give place unto wrath: for it is written, Vengeance is mine; I will repay, saith the Lord.
1 Thessalonians 1:10. And to wait for his Son from heaven, whom he raised from the dead, even Jesus, which delivered us from the wrath to come.
1 Thessalonians 5:9. For God hath not appointed us to wrath, but to obtain salvation by our Lord Jesus Christ,
Romans 8:35. Who shall separate us from the love of Christ? shall tribulation, or distress, or persecution, or famine, or nakedness, or peril, or sword?
Jeremiah 30:7. Alas! for that day is great, so that none is like it: it is even the time of Jacob’s trouble, but he shall be saved out of it.
Revelation 3:10 Because thou hast kept the word of my patience, I also will keep thee from the hour of temptation, which shall come upon all the world, to try them that dwell upon the earth.
Categories: Economic Collapse