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There have been growing concerns that the coronavirus outbreak will tip the global economy into recessions.  These are sentiments affirmed by Goldman Sachs’ economist Jan Hatzius who indicates that the epidemic is pushing the economy onto the edge of an economic crunch.

Global economy on the edge of recession because of coronavirus

According to Hatzius, the global economy could shrink by around a quarter, but it could recover before dipping into a recession. The economist indicated that it is unlikely that we could witness more weaknesses if it is out of China, and then there will be spillover related to that. Similarly, a pullback in consumer activity is unlikely, and thus the impact could just stop before the economy goes into recession.

Several analysts globally have cut their 2020 economic projections as the coronavirus continues to spread beyond China and Asia to other countries. The Organisation for Economic Cooperation and Development indicates that if the pandemic expands to Europe and North America, world economic growth will drop to 1.5% this year, which is less than the 3% projected when the virus broke.

Laurence Boone, the chief economist of the organization, indicates that such a scenario will throw Europe and Japan into a financial crunch and the US near zero. The OECD states that even if the mild outbreak of the virus outside China is contained, the growth of the global economy will slow by half a percentage point compared to previous predictions.

Markets rebound after falling last week

The outbreak of the coronavirus has sent markets across the globe reeling as investors expect an economic fallout. Wall Street analysts have revised their 2020 guidance downward. Last week US markets plunged, but they rebounded on Monday after Dow Jones Industrial Average S&P 500 and Nasdaq Composite had slid into correction level last week, which means they were around 10% below their record highs. 

As the effects of the outbreak start to be felt, the Federal Reserve and other Central Banks have announced that they will support markets to avoid the economy dipping into recession.