Coronavirus
Morgan Stanley, Goldman See Virus Causing Greater Economic Pain

(Bloomberg) — Morgan Stanley and Goldman Sachs Group Inc. economists said the coronavirus will inflict greater economic pain than they previously expected as they warned of a record plunge in the U.S. output in the second quarter and a deeper global recession.
Morgan Stanley’s U.S. economists led by Ellen Zentner told clients in a report on Sunday that they now see American gross domestic product falling 30.1% in April-June. That will drive up unemployment to average 12.8% over the period, they said.
At Goldman Sachs, Jan Hatzius’s team said in a report that they now expect the world economy to contract about 1% this year, which would be a bigger decline than even that witnessed in 2009 amid the financial crisis. They were already projecting a 24% drop in U.S. output in the next quarter.
The dire forecasts from two of Wall Street’s biggest banks reflect the sudden stop that the U.S. and European economies are witnessing following China’s slump at the start of the year.
Such predictions are raising fears of depression, but Morgan Stanley economists said in a separate report that a sustained contraction should be avoided given the response of fiscal and monetary policymakers. Both Morgan Stanley and Goldman Sachs anticipate a recovery beginning in the third quarter, although that is subject to risks.
“Economic activity has come to a near standstill in March,” the Morgan Stanley economists said. “As social distancing measures increase in a greater number of areas and as financial conditions tighten further, the negative effects on near-term GDP growth become that much greater.”
In a Bloomberg interview on Sunday, Federal Reserve Bank of St. Louis President James Bullard predicted the unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in GDP.
Elsewhere, Bank of America Corp’s base case is for a near 25% drop in second quarter U.S. GDP, while JPMorgan Chase & Co. forecasts a 14% decline.
Those forecasts come as economists warn that the world is already in recession, its first since 2009’s 0.8% contraction.
For China, most see the worst hit in the first quarter. JPMorgan Chase have flagged a 40% plunge in Chinese gross domestic product in the first quarter from the previous three months, the biggest contractions in at least 50 years.
Chinese officials, including Premier Li Keqiang, have pointed to claims the outbreak has been controlled and signs of a resumption of activity as reasons for optimism with regards to China’s outlook.
“Economic indicators will likely show significant improvement in the second quarter and the Chinese economy will return to its potential output level rather swiftly,” People’s Bank of China Deputy Governor Chen Yulu told reporters in Beijing on Sunday.
-
OER Magazines2 months ago
OER, April 25
-
Alamaliktistaad Magazines2 months ago
Al-Iktisaad, April 25
-
Renewables1 month ago
Jindal Renewables and OQ Alternative Energy Sign Joint Development Agreement to Advance Integrated Renewable Power Projects in Oman
-
Business2 months ago
St. Petersburg International Economic Forum 2025 unveils its Business Programme
-
Leaders Speak1 month ago
OERLive SPOTLIGHT: Oman Sustainability Week 2025 and Oman Petroleum & Energy Show
-
Alamaliktistaad Magazines4 weeks ago
Al-Iktisaad, May 25
-
Banking & Finance2 months ago
How is National Bank of Oman Working Towards Creating a Robust Fintech Ecosystem?
-
Banking & Finance2 months ago
How Bank Muscat is Pioneering Digital Solutions to Empower Customers