A range of financial institutions around the world have admitted that the coronavirus pandemic would have a hard impact on the world economy.
Countries around the world are gearing up to face the upcoming slowdown. US Federal Reserve has already slashed interest rates by a half-point, CNN reported.
Though the likelihood of inflation is low, the threat of stagflation is real. Stagflation means an economic slowdown coupled with rising prices.
“Stagflation would be a disaster. People are dismissing it as an old threat from the ’70s that will not happen again, but you could see it come back,” said Nancy Davis, a chief investment officer of Quadratic Capital Management and portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL).
The global uptick in the Gross Domestic Product (GDP) could be as low as 1 percent this year, the Institute for International Finance (IIF) said last week, and that prediction was even before an oil price crash on Monday sent stocks into another tailspin, CNBC reported.
“A global recession is now all but certain,” Rabobank, Dutch multinational banking and financial services company, said on Tuesday while predicting global growth to hit 1.6 percent of GDP by the end of the year.
The world economy grew 2.9 percent in 2019, according to estimates from the International Monetary Fund (IMF).
Coronavirus which originated in Wuhan city of China last December has now spread to over 90 countries. The number of people infected with the deadly virus has surpassed 114,000 worldwide.
Italy Economy Minister, Roberto Gualtieri, said on Wednesday said that the country’s economy may shrink for at least two months due to the outbreak of the novel coronavirus and subsequent emergency measures.
Italy has been put under a complete lockdown after cases of coronavirus spiked in the country. Prime Minister Giuseppe Conte announced the countrywide restrictions, which earlier were only restricted to northern Italy.