International forecasts are indicating a massive decrease in economic activity due to COVID-19, followed by a massive increase post-pandemic, explained Peter Hall, vice-president and chief economist with Export Development Canada.
“Inside of a year you are going to have these very radical movements,” he noted. “Is that wishful thinking? It’s not wishful thinking. One of the key reasons is, it’s not just people getting back to work and it’s not just pent up demand, but as we analyze the pattern of incidents of COVID-19 around the world, we get to a point where it flattens out…which we are seeing in China and the beginnings of it in countries like South Korea, Singapore and Hong Kong.
“Inside of one month to a five-week period of time, we are already seeing the effects that total lockdown has on even economies that have been hard hit by this virus. China is already successfully getting people back to work.”
Hall provided a global economic outlook during the Canadian Construction Association’s Navigating COVID-19 webinar series held at the beginning of April.
He said businesses want to open up again and get their cash flows going and people want to get back to work.
“As that happens, from what we see happening in China right now, that is a radical increase in activity,” he explained. “The drop in activity is absolutely required to get this thing under control, that’s what puts us into recession, but what lifts us out of recession in a really big way is bearing the fruit of all that lockdown activity, the ability to go back to work.”
Hall stated the bounce back will be dramatic.
“It is a chore to get through this period of time, it is going to damage our bottom lines, but remember we have very significant stimulus programs out there right now that are helping us,” he said. “Another factor behind our belief that the realistic forecast, not the optimistic forecast, is that we will have a bounce back, and that underneath all of that we have a world economy that has pent up demand that is quite strong.”
For those in the economic forecasting profession, all outlooks are currently under revision, Hall said.
“Businesses, government associations and analysts are all trying to get our minds around how this is going to impact the economy, where it is that things are really headed, what kind of shape are we going to be in when this thing is all over, when will it be over,” he said.
The first half of 2020 is going to be the hardest part, he said, adding most people have never seen a situation like this.
“This is really the worst moment we have had since 2008/2009. It has become apparent that even though that is what we call the Great Recession, we are looking at a second quarter worldwide that is looking much more like Depression-level reductions in activity,” said Hall.
“It’s going to be rough and it’s going to be very sharp but it’s not going to last for long. We do feel that by the time we get into the second half of this year we’re all going to have to fasten our seatbelts because nobody is really expecting that or preparing for it to happen, so that is a time when we can really capture a lot of growth that is out there.”
It helps to look at China because it got hit the hardest first.
“China is starting to pull out of things right now and getting back to producing, but the difficulty is with wave two hitting the West. They are not going to have anybody to sell to because the supply chain interruption has shifted from China-based to globally-based,” said Hall. “China will suffer in the second quarter of the year due to lack of demand from other parts of the planet, parts that China is actually quite dependent on.”
Follow the author on Twitter @DCN_Angela.
Recent Comments
comments for this post are closed