Home / Economics / Just How Bad Is It? Here’s The Economic Damage The Coronavirus Will Cause, According To Major Banks

Just How Bad Is It? Here’s The Economic Damage The Coronavirus Will Cause, According To Major Banks

Many are now forecasting a recession in 2020.

Mark Lennihan/ASSOCIATED PRESS

Topline: As the coronavirus continues to roil stock markets and leads to widespread business shutdowns across the country, a growing number of top banks on Wall Street have been issuing increasingly dire forecasts on the economic turmoil caused by the pandemic, with many saying that a recession will hit in 2020—if it hasn’t already done so.

Goldman Sachs economists on Friday forecast an unprecedented 24% hit to U.S. second-quarter GDP, following a 6% decline in the firstquarter, due to coronavirus; the bank also expects unemployment to surge to 9% and full-year GDP for 2020 to fall 3.8% on an annual average basis.
Bank of America warned late on Thursday that a recession due to the coronavirus pandemic is already here: “Jobs will be lost, wealth will be destroyed and confidence depressed,” the bank’s U.S. economist, Michelle Meyer, wrote in a note, as the Bank of America also forecast the economy to “collapse” in the second quarter, shrinking by 12%, with GDP for 2020 taking a 0.8% hit. 
Morgan Stanley warned investors of the same thing: “Global recession in 2020 is now our base case,” the firm’s chief economist, Chetan Ahya, wrote in a recent note, predicting global economic growth to slow to 0.9% this year—the lowest level seen since the 2008 crisis.
Deutsche Bank predicts that the U.S. economy will contract by 12.9% in the second quarter, with the coronavirus-driven declines set to “substantially exceed anything previously recorded going back to at least World War II,” according to a note Wednesday.
UBS similarly sees a “massive contraction” of almost 10% in second-quarter GDP, while also predicting a deep recession in the first half of 2020 due to the coronavirus pandemic.
But: Most of the economists at the big banks listed above still predict the economy will rebound later in 2020, or by 2021 at the latest.

Surprising fact: Dubravko Lakos-Bujas, chief U.S. equity strategist for JPMorgan Chase, is so bullish on a rebound that he expects the SP 500 to reach 3,400 points, or 47% higher than its current level, by 2021. Before that happens, he says, GDP will shrink 14% in the second quarter—a steeper decline than the 8.4% drop experienced in the fourth quarter of 2008.

Tangent: Billionaire investor Ray Dalio, who heads Bridgewater Associates—the world’s largest hedge fund, told CNBC last Thursday that the coronavirus pandemic will cost U.S. corporations up to $4 trillion. “What’s happening has not happened in our lifetime before. … What we have is a crisis,” Dalio said, also adding, “a lot of people are going to be broke.”

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