International trade could contract 27% in the second quarter as the pandemic ravages global industries, according to the United Nations Conference on Trade and Development.
“Assuming persisting uncertainty, UNCTAD forecast indicates a decline of around 20% for the year 2020,” according to the group.
“Trade in the automotive and energy sector collapsed, while trade in agri-food products has been stable.”
The conference’s findings and forecasts contribute to a bleak picture of the global economy.
Global GDP
If the world sees a second outbreak of the coronavirus and the biotech community can’t find a vaccine, global GDP could plunge by 7.6% this year, the Organization for Economic Cooperation and Development said in a Wednesday report.
This reflects an acceleration of unemployment to more than twice the pre-pandemic rate, an 8.5% decline in U.S. GDP and an 11.5% drop in Europe’s GDP.
"As long as no vaccine or treatment is widely available, policymakers around the world will continue to walk on a tightrope," OECD chief economist Laurence Boone wrote in the report.
Without a second wave, global GDP would still fall 6%, with the U.S. recording a 7.3% decline and Europe contracting 9%, according to the OECD.
"How governments act today will shape the post-COVID world for years to come," OECD Secretary-General Angel Gurría said in a statement.
"This is true not only domestically, where the right policies can foster a resilient, inclusive, and sustainable recovery, but also in terms of how countries cooperate to tackle global challenges together. International cooperation, a weak point so far in the policy response, can create confidence and have important positive spillover effects."
Global GDP rose 2.7% last year, and U.S. GDP tried to keep pace, closing out the year with fourth-quarter growth of 2.1%. The coronavirus catalyzed a 5% contraction in the U.S. in the first quarter of 2020, marking an end to the nation’s longest recorded expansion period.
“The decrease in PCE reflected a decrease in services, led by health care as well as food services and accommodations,” the Bureau of Economic Analysis said in its report. “The decrease in private inventory investment was mainly in nondurable goods manufacturing, led by petroleum and coal products.”
Global Debt
The Committee for a Responsible Federal Budget predicted in April that the U.S. would close 2020 with a $3.8-trillion deficit — more than double the previous record and almost four times 2019’s deficit of $984 billion.
Such a deficit would bring the national debt to $20.6 trillion by the end of FY2020, surpassing the country's nominal GDP. By the CRFB’s estimates, the debt-to-GDP ratio could exceed World War II records by 2023 — and that’s if 2021 brings a strong recovery.
“Assuming a slower and weaker recovery (but no changes in law), we estimate debt would grow to 117 percent of GDP by 2025,” the report said.
Notably, the U.S. Treasury Department recorded an $1.88 -illion deficit for FY2020 by the end of May.
The U.S. isn’t the only country racking up debt. By mid-May more than 90 countries, including Egypt, Pakistan, Argentina and Ukraine, had requested bailout funds from the International Monetary Fund.
As of mid-June, the IMF had granted 69 countries about $24.62 billion in emergency financing and 27 countries about $243.61 million in debt relief.
Unemployment
The U.S. unemployment rate in May likely exceeded 16%, according to the Bureau of Labor Statistics. In Canada, the rate struck 13.7%. Peer nations have yet to report their May figures, but the estimates don’t inspire optimism.
According to OECD estimates, a second outbreak of the coronavirus could yield fourth-quarter unemployment rates of 16.9% in the U.S., 14.8% in the U.K., 13.7% in France and 10.6% in Canada.
Germany (5.5%) and Japan (4%) could see some of the lowest rates. If a second wave is avoided, the rates could drop to 10.4% in the U.S., 9.7% in the U.K., 12.3% in France, 8.8% in Canada, 5% in Germany and 2.4% in Japan.
Inflation Rates
Consumer price indexes across a number of developed countries plunged in April, according to the International Monetary Fund’s most updated records. The U.S. CPI fell from 1.54 in March to 0.33 in April. The metric fell to 0.93 in the U.K. and 0.86 in Germany.
The OECD expects the U.S. inflation rate to recover to 1.28% by the end of 2021, while the UK rate falls to 0.4% and Germany drops to 0.61%. The total rate for OECD countries is expected to rise to about 1.31%, buoyed by high inflation in Latin America, China, and a few countries in eastern and central Europe.
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