Covid-19: Global economy likely to contract by 5.2% in 2020, says report

The global economy is likely to contract by 5.2 per cent in 2020 with the coronanvirus still spreading and the economic prospects of countries across the world looking muted, says a report.

According to Dun and Bradstreet's Country Risk and Global Outlook Report, that covered 132 countries, the wider global context remains sombre and the global economy will not reach pre-pandemic levels of activity again before 2022.

"D&B is currently forecasting that the global economy will contract by 5.2 per cent in 2020 - the biggest decline since the Second World War and a far stronger contraction than the 1.7 per cent recorded in 2009 during the global financial crisis," the report said.

The Asia Pacific region is unlikely to shake off the economic effects before the end of 2020, it added.

"Widespread quantitative easing means that financial asset prices globally are not reflecting the shock to fundamentals. But with many countries easing their lockdowns, a more varied picture of upgrades and downgrades has emerged," Dun & Bradstreet Chief Economist Arun Singh said.

Singh further noted that "worryingly, a sharp recession is still forecast, and we expect that the world economy will not attain pre-pandemic levels of activity before 2022."

The report said any recovery into 2021 (even without a second bout of the pandemic) is going to be curtailed by several factors. Foremost will be the presence of degrees of social distancing (despite the easing of lockdowns) and higher levels of post-lockdown unemployment and poverty.

Meanwhile, the number of cases around the world linked to Covid-19 has crossed 1.18 crore and the death toll has topped 5.44 lakh. In India, the death toll due to the disease rose to 20,642 and the number of infections increased to 7,42,417 on Wednesday.

Singh further said India's economy is expected to contract this fiscal year after four decades of positive growth.

"In March, we downgraded India's rating to DB5c from DB4d - both the magnitude of the downgrade and the risk level are the highest since 1994," Singh noted.

DB5 means high risk and denotes that "considerable uncertainty is associated with expected returns. Businesses are advised to limit their exposure and/or select high risk transactions only."

Dun & Bradstreet's Country Risk Indicator provides a comparative, cross-border assessment of the risk of doing business in a country. The risk indicator is divided into seven bands, ranging from DB1 to DB7, with DB1 being lowest risk.

Each band is subdivided into quartiles (a-d), with 'a' representing slightly less risk than 'b' (and so on). Only the DB7 indicator is not divided into quartiles.