As cases of coronavirus spiral upward, disruptions to the global economy are increasing. Goldman Sachs Research's economics team has cut its global GDP growth forecast to 1¼% for the year—less severe than the deep recessions of 1981-82 and 2008-09, but worse than the mild recessions of 1991 and 2001. Consistent with this, our economists now expect recessions in Europe, Japan, Canada and possibly the US. The team warns that uncertainty around these numbers is much greater than normal. In the short term, strict government measures to combat the virus are likely to accelerate a decline in consumer and business spending on activities such as travel and entertainment—and companies are already reporting issues with their supply chains. For the US, the team’s baseline assumption is that the economy experiences the sharpest quarterly contraction since the global financial crisis in the second quarter, followed by strong sequential growth in the second half of the year. But the outlook depends on a number of factors including the severity and length of the outbreak, how quickly spending recovers when it abates, and the effectiveness of monetary and fiscal policy in providing support.
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