Optimistic projections for the economic recovery come from economists at banking and investment firm Morgan Stanley. The company economist predicted that the global economy will recover to pre-pandemic levels at the beginning of the fourth quarter or three months earlier than previously estimated.
“Evidence suggests that the viral or economic equation has shifted decisively from the early days of the outbreak,” said Morgan Stanley economist in a note to clients.
This optimistic projection is supported by the increasing number of countries that are getting better at dealing with the corona virus.
Morgan Stanley projects that the US, which currently has the most cases of corona in the world, reaching 6.4 million people, will have its economy reach pre-Covid-19 levels in the second quarter of next year. Meanwhile, all developed markets could reach that level in the third quarter of next year.
The global economy is also predicted to improve in line with fiscal and monetary support. The prospect of recovery is likely to be accompanied by rising inflation.
Currently, dozens of countries have fallen into recession, such as the US, UK, Singapore, Malaysia, the Philippines and Japan. The recession due to Covid-19 is the deepest since the recession during the second world war in 1945-1946.
This can be seen from the per-capita gross domestic product growth of -6.2%. This figure is twice as deep as the recession that occurred in 2009 of -2.9%.
Previously, the International Monetary Fund or IMF made a pessimistic forecast at the end of last June, predicting that the global economy would contract by up to 4.9%. This forecast is worse than the April forecast of minus 3%.
“The Covid-19 pandemic has a more negative impact on economic activity in the first half of 2020 than expected, and the recovery is projected to be more gradual than previously thought,” the IMF said in its Global Economic Outlook.
The IMF also cut its projection for economic growth next year to 5.4% compared to their projection last April. Developed countries will experience a deep economic contraction, which is estimated to be negative at 8%. The economy of European countries is estimated to be negative at up to 10.2% and the United States at minus up to 8%.
Meanwhile, next year, the economies of developed countries will recover and grow by 4.8%. The US economy is predicted to grow 4.5%, while European countries will grow 6%.
Developing economies and emerging markets are also expected to experience economic contraction this year, although it is better than developed countries, namely minus 3%. The Chinese economy is estimated to still grow 1%, while India is minus 4.5% and ASEAN-5 minus 25.
The basic projection of IMF predictions is made with the assumption of social restrictions that will still be applied by many countries during the second half of this year which will disrupt productivity and national chains.
IMF reminded that this prediction is still shrouded in uncertainty that has never happened before. Global economic conditions will depend on the duration of the pandemic, social distancing measures, changes in global supply chains, and new labor market dynamics.