JAKARTA (TheInsiderStories) - Fitch rated the global GDP recovered more quickly than expected in third quarter (3Q) of 2020, but renewed nationwide lockdowns will prompt fresh declines in activity in Europe in 4Q 2020. A weaker European recovery will weigh on world growth next year but our 2021 China and United States (US) forecasts are unchanged.
It said, third-quarter GDP expanded a lot faster than anticipated in the US, and particularly the Eurozone. Now, the agency expect US GDP to fall by 3.7 percent in this year compared to 4.6 percent in its September’ outlook and in 2021 is unchanged at 4 percent.
China‘ ongoing annual expansion was a little weaker than expected, leading Fitch to revise down the estimation for 2020 growth modestly to 2.3 percent from initially at 2.7 percent, but the recovery continues to broaden. Renewed nationwide lockdowns in France, Germany and the United Kingdom (UK) and tighter restrictions in Italy and Spain are likely to compress European service sector GDP significantly.
“But with schools remaining open, manufacturing and construction activity set to continue in France, starting levels of activity already depressed and recent experience gained in working and spending through lockdowns, the impact on daily activity is likely to be less severe than in the spring,” said Brian Coulton, Fitch’ chief economist in the report.
He added, the latest lockdowns are planned for four weeks but its assume new restrictions will only be phased out gradually over the winter months. On this basis he sees the Eurozone‘ GDP falling by around 4 percent in 4Q 2020.
“However, we expect eurozone GDP to recover quite sharply next spring. We have lowered our annual 2021 eurozone growth forecast to 4.5 percent. A key downside risk is that further lockdowns become necessary later in the year,” he added.
While, IHS Markit reported, a global survey of over 6,5000 companies shows firms in China are expecting to lead the recovery of output lost due to the COVID-19 pandemic, with the United States close behind. Firms in India report the slowest recovery prospects, followed by Japan, Spain, Italy and the UK.
Chris Williamson, chief business economist at IHS Markit, said, “The survey indicates encouraging overall progress in the global economic recovery from the COVID-19 outbreak, but trends have been varied. Notably, some countries and sectors have made less progress than anticipated when the survey had previously been conducted back in June, reflecting disruptions caused by further waves of virus infections.”
All countries have become more upbeat about recovery progress since the prior survey (conducted in June) with the exceptions of India, Spain and France. Brazil has seen by far the biggest improvement in recovery prospects. Hotels, restaurants, and other consumer-facing services are anticipating the longest recoveries.
Transportation and storage likewise remains especially hard-hit, alongside basic metal goods makers. Food, drink, car makers and auto producers in particular are the most upbeat.
“Companies in China have not only reported the greatest success so far in recouping output lost to COVID-19, but also anticipate making the fastest full recovery, though US companies come a close second. Given that the outbreak and associated lockdown occurred earlier in China, this represents very encouraging progress for the US,” adds by Williamson.
in addition, he rated, the high levels of infections, and second waves of the outbreak, have nevertheless meant many countries have achieved less progress than had been signaled when the prior survey was conducted back in June. Most notable are India, Spain and Italy, where recovery prospects reported by companies have even taken backward steps.
“Similarly, the virus has had a bigger and more prolonged impact than previously expected on recovery paths for many consumer-facing service companies in particular, which continued to lag the overall recovery. Perhaps not surprisingly, hotels and restaurants are anticipating the slowest recovery paths.” said the economist.
He continues, “It was perhaps to be expected that food and drink companies would lead the recovery, reflecting the sustained need for such non-discretionary purchases, vehicle manufacturing is a stand-out performer, a large proportion of which is accounted for by auto makers, which has reported the biggest improvement in recovery prospects over the past four months.”
Then, said the report, half of all companies report current output to be running below pre-pandemic peaks Looking at current operating levels, some 51 percent of companies globally continued to operate with output below their pre-pandemic peaks as of mid-October, albeit an improvement from 65 percent as of mid-June.
Of the remaining 49 percent, only 14 percent have seen output rise above the prior peak. That compares with 8 percent having regained the prior peak back in June, suggesting only a modest further recovery since June, with only an additional 6 percent of firms having breached prior output peaks over the July to October period.
Although 51 percent of companies globally are still waiting to recover lost output, 8 percent expect to have regained their prior peaks within three months, with a further 11% within six months. An additional 11 percent expect to have recovered within the next year. Only 9 percent of firms globally expect the recovery to take between 12 and 24 months, though a further 4 percent anticipate the recovery exceeding two years.
Unfortunately, said the report, 3 percent of firms globally never expect to regain their pre-pandemic output peaks, up slightly from 2 percent back in June. However, the figures vary markedly, ranging from zero companies in the US and China to 13 percent in Japan. By sector, the most common expectation of a permanent loss of output was seen in the hotels and restaurants also textiles and clothing manufacturing sectors.
The survey data therefore imply that, of the 48 percent of firms that are waiting (and still expect) to recover their lost output, the average recovery time is five months, ranging from an average of 13 months in India and 10 months in Spain to just two months in China and three months in the US. By sector, the longest expected recovery time is seen for hotels and restaurants (at 12 months) followed by transportation and storage services (eight months).
Edited by Editorial Staff, Email: theinsiderstories@gmail.com
