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World Economy Review - March 2020

RTS Index

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The coronavirus crisis is crushing global economic growth, according to Fitch Ratings in its latest quarterly "Global Economic Outlook (GEO). "The level of world GDP (gross domestic product) is falling. For all intents and purposes we are in global recession territory," said Brian Coulton, chief economist at Fitch.

The firm has nearly halved its baseline global growth forecast for 2020 to just 1.3 per cent from 2.5 per cent in the December 2019 GEO. The revision leaves 2020 global GDP US$850 billion lower than in the previous forecast. But we could very easily see an outright decline in global GDP this year if more pervasive lockdown measures have to be rolled out across all the G7 economies.

Emergency macro policy responses are purely about damage limitation at this stage but should help secure a `V-shaped` recovery in 2H20, although this assumes that the health crisis eases. Fitch said the shock to the Chinese economy had been very severe.

GDP is likely to fall by over five per cent (not annualised) in 1Q20 and to be down by one per cent year-on-year. Falling GDP in China is virtually unprecedented and, in the near term at least, these numbers look worse than most previous hypothetical `hard-landing` scenarios.

The good news is that the daily number of new Covid-19 cases in China has fallen very sharply, which should pave the way for a marked economic recovery in 2Q19 - high-frequency indicators already point to this starting in March.

Nevertheless, Fitch said the delayed impact of supply-chain disruptions and lower Chinese ...

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The World Economy

World GDP Growth, %

World GDP Growth

The world economy can be evaluated in various ways, depending on the model used, and this valuation can then be represented in various ways (for example, in 2006 US dollars). It is inseparable from the geography and ecology of Earth, and is therefore somewhat of a misnomer, since, while definitions and representations of the "world economy" vary widely, they must at a minimum exclude any consideration of resources or value based outside of the Earth.
For example, while attempts could be made to calculate the value of currently unexploited mining opportunities in unclaimed territory in Antarctica, the same opportunities on Mars would not be considered a part of the world economy - even if currently exploited in some way - and could be considered of latent value only in the same way as uncreated intellectual property, such as a previously unconceived invention. Beyond the minimum standard of concerning value in production, use, and exchange on the planet Earth, definitions, representations, models, and valuations of the world economy vary widely.

It is common to limit questions of the world economy exclusively to Human economic activity, and the world economy is typically judged in monetary terms, even in cases in which there is no efficient market to help valuate certain goods or services, or in cases in which a lack of independent research or government cooperation makes establishing figures difficult. Typical examples are illegal drugs and prostitution, which by any standard are a part of the world economy, but for which there is by definition no legal market of any kind.

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