The latest Bank of America (BofA) Global Research indicated that global economy is heading for the worst.
The BofA report stated recession as “headwinds,” which in business means an economic circumstance affected by certain events or conditions that hamper economic growth. The analysis is that the coronavirus outbreak and several other factors are building up toward a global recession.
Recession is defined as a temporary economic situation in which industrial and trade activities continuously decline for more than a few months, to yield a less than favorable Gross Domestic Product (GDP) growth in two (2) successive quarters. As negative factors continue to affect global economic activities continue, the BofA report projects that the global GDP for the year 2020 is likely to slow at 2.8%; a reading that is similar to the sub-3% growth seen during the 2009 recession.
Factors Cited by BofA Study as Drivers of Potential Economic Recession
The coronavirus or Covid-19 outbreak is cited as the main driver of the current economic downturn. The global research said that several other factors, such as political conflicts and uncertainties, as well as trade war and weaknesses of some countries in handling cases of Covid-19 infections, are compounding the resulting impact caused by the coronavirus problem.
Ever since the Covid-19 virus broke out in China, disruptions in the country’s economic activities ensued. Touted as the “world’s factory,” the inability of China to produce goods that it normally supplied to manufacturers and traders across the globe, created a domino effect.
Not a few U.S. companies rely heavily on key goods supplied by Chinese manufacturers. The shortage in production has disrupted the supply chain, causing investors to panic and to right away sell off their stocks. The UK’s Financial Times Stock Exchange (FTSE) is already in the “correction territory,” which means the financial market are seeing a decline of 10% or higher.
Last week, the U.S. financial markets suffered a week-long blow from the massive sell-offs that transpired. If the trend continues in the coming week ahead, the U.S. financial markets will also go into correction territory.
The bad news is that the current main driver of an economic recession cannot be expected to go away soon. The Director of the National Institute of Allergy and Infectious Diseases (NIAId), Anthony Fauci said that
”Covid-19 is a brand new virus, and we do not know or can count on the possibility, if it will die out, or even diminish once the weather gets warm.”
Although Director Fauci announced earlier that human testing for a potential vaccine for the novel coronavirus will go underway in six weeks at the least if there are no hitches, it is only the first phase of a series of trials that will not be applicable any time soon.
Uncertainties posed by the forthcoming U.S. presidential elections, unresolved trade wars, uncompromising trade deal negotiations and forces of nature that bring major disruptions, are only some of the factors that create an outlook that points toward an imminent global economic recession.
Although some industries like tourism, hospitality services and rental businesses do not rely on products and raw materials supplied by China, they have likewise, been affected by travel restrictions and slow consumer traffic. That is why businesses are urged to take proactive actions, since a recession will likely result to business losses that would call for mass layoffs.
To ordinary folks, loss of jobs means inability to meet their day to day cost of living, including house rentals. This early, it would be wise for owners of rental properties to engage the services of property management companies, since they have the expertise in mitigating the impact of a looming, global economic recession.