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The recession will be short

Alessandra Quarta ContebyAlessandra Quarta Conte
22 June 2020
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Reading Time: 3 mins read
Tags: Alessandra Quarta ConteCovid-19economistEditor-in-chief Patrizia Marininvestmentsrecession
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Instead of Covid-19 the economists said that the recession will be shorter than we think.

While investors and market spectators brace for the deepest global recession since World War II, there is reason for hope as economists now see the economic impasse ending in record time as well.

The COVID-19 contagion and the subsequent stringent lockdown measures that followed have evidently thrown the world economy in turmoil. Even as countries reopen, economists have been warning how the globe is currently undergoing its deepest global recession in a couple of decades short of a century.

In the coming second quarter, global gross domestic product – the broadest measure of economic growth – has widely been expected to plunge, bogged down by the top economies.

“The deepest global recession in 75 years will also likely be the shortest on record,” revealed Nariman Behravesh and Sara Johnson, global economists at IHS Markit.

“All signs point to the second-quarter real GDP plunge in the US and European economies being one for the records, with double-digit quarter-on-quarter declines in the United States, Eurozone, and United Kingdom,” IHS Markit, which publishes widely watched surveys of business and economic activity, noted in a report.

However, the economists said that while these downturns will still be the worst since the end of World War II, they anticipate that growth will return in the third quarter in the US and European economies.

“Ironically (and mercifully) the recessions triggered by the coronavirus disease (COVID-19) pandemic in the developed economies are likely to have been short,” the IHS Markit economists explained.

The recession was widely viewed to have lasted two months in the United States and Eurozone – March and April – and three months in the United Kingdom, which extended into the month of May as well.

For the US economy, this would be the shortest recession on record, the survey showed, with the prior record for the shortest recession being the six-month-long downturn in 1980.

we will have a quick rebound.

“Thus, while the worst is over, the recovery is likely to be hard slog—even after an anticipated short-term bounce,” the economists cautioned.

The global index of manufacturing export orders remains deep in contraction territory, suggesting the external demand outlook of China and other Asian export powerhouses is highly challenging.

IHS Markit predicts that global trade will contract at a double-digit rate in 2020.

“Even with the beginnings of a recovery in place, the fallout from this pandemic and the lockdowns can only be described as massive… With millions of businesses shuttered and tens of millions of workers unemployed, the economic and social costs continue to rise and will stay elevated for a long time”.

The economists suggested that this will require continued and additional support from central banks and governments and continued vigilance by health authorities vis-à-vis new waves of the COVID-19 virus. “Otherwise, this deep and brief downturn could turn into something far worse”.

In the meanwhile foreign investors can take up shareholding in Commercial Bank of Dubai up to 40 per cent, effective from June 14.

“The bank has received substantial interest from foreign investors, which was the main driver for us setting the foreign ownership limit at the [new] level,” said Dr. Bernd van Linder, CEO of Commercial Bank of Dubai. “It will allow us to broaden our investor base as well as sustain capital inflows in the UAE”.

The bank has completed all regulatory formalities following the shareholders’ approval on March 11.

Meanwhile, Emirates NBD said as many as 254 “unique investors” picked up 101,73 million shares on May 28. The biggest single purchase was for 10.11 million shares.

The bank said that this increase in purchase volume coincides with Emirates NBD’s inclusion in the MSCI Emerging Markets Standard Index Emirates NBD Bank confirms that a large number of these purchases were made by Emerging Markets Index Tracking Funds.

Alessandra Quarta Conte

Alessandra Quarta Conte

Alessandra Quarta Conte

Lawyer, International Business Strategist, Real Estate Consultant in Dubai.

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