The global outlook: recent developments and perspectives, April 2020

THE GLOBAL ECONOMIC OUTLOOK: RECENT DEVELOPMENTS AND PERSPECTIVES Luiz de Mello, Director, OECD Economics Department 24 April / BIAC Finance Committee Video conference

2

The economic situation was stabilising before Covid-19, ‌ GDP growth %, year-on-year

7 6 5 4 3 2 1 0 World

Source: OECD Economic Outlook database.

G20 Advanced

US

Euro area

Japan

G20 Emerging

China

‌ but activity and consumption have dropped drastically since Covid-19 Composite PMI China

Japan

Consumption index

Euro area

y-o-y % changes 20

United States

65

Global

OECD

y-o-y % changes 20

Non-OECD

60 10

10

50

0

0

45

-10

-10

-20

-20

30

-30

-30

25

-40

-40

55

40

Note: LHS: The latest data point is for March 2020. RHS: Data are for retail sales in the majority of countries. Monthly household consumption is used for the United States and the monthly synthetic consumption indicator is used for Japan. The aggregations are based on PPP weights. Non-OECD includes Albania, Belarus, Brazil, Bulgaria, China, Chinese Taipei, Colombia, Croatia, Hong Kong China, Indonesia, Malta, Romania, Russia, Singapore and South Africa.

Source: Refinitiv; Markit; OECD database and OECD calculations.

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

35

3

4

Several sectors are being affected, ‌ Selected sectors as a share of GDP

Employment in selected sectors

2018 or latest available

Share of total employment, 2018

Arts, entertainment and recreation Accomodation and food services

% of GDP

% of GDP 45

Total affected sectors (rhs)

9 8

40

7

35

6

30

5

25

4

20

3

15

2

10

1

5

0

0 ESP

JPN

ITA

GBR

FRA

USA

CAN

DEU

Arts, entertainment and recreation Accommodation and food services

% 12 10 8 6 4 2 0 ESP

KOR

GBR

ITA

JPN

FRA

Note: RHS: Share of total GDP at constant prices. Total economic activity directly affected by shutdowns and restrictions on movement includes: manufacture of transport equipment, construction, wholesale and retail trade, air transport, accommodation and food services, real estate services (excluding imputed rent), professional activities, arts, entertainment and recreations, and other service activities.

Source: OECD database; OECD ALFS 2018 database; and OECD calculations.

DEU

5

‌ with strong adverse economic impacts Illustrative decline in consumption expenditure The potential impact of partial or complete shutdowns on private consumption in the G7 economies Percent in total consumers’ expenditure Clothing & footwear Arts and recreation Total 0

CAN

Household equipment Hotels, restaurants and package holidays DEU

FRA

GBR

Transport expenditure Other personal services ITA

JPN

USA

-5 -10 -15 -20 -25 -30 -35 -40 Note: The spending data are based on a COICOP classification in all countries. The categories included are clothing and footwear (COICOP 3); furnishings and household equipment (5); vehicle purchases (7.1); operation of private vehicles (7.2); transport services (7.3); recreation and culture excluding package holidays (9.1-9.5); package holidays (9.6); hotels and restaurants (11); and personal care services (12.1). All expenditure on clothing and footwear, furnishings and household equipment, vehicle purchases, package holidays and personal care services is assumed to stop completely; spending on recreation and culture, and hotels and restaurants is assumed to decline by three-quarters; and spending on transport services and the operation of private vehicles to decline by one-half.

Source: OECD Annual National Accounts; Statistics Bureau, Japan; and OECD calculations.

Financial-market stress hampers transmission of policy Outstanding amount of non-financial corporate bonds

Credit growth slowed dramatically during the GFC Total credit to the private non-financial sector, domestic currency

% yoy 10

France

United States

$14Tn.

United Kingdom

0

2019

-4

2018

2

2017

-2

2016

4

2015

0

2014

6

2013

2

2012

8

2011

4

2010

10

2009

6

2008

12

2007

8

13.5

Dec 2008

Dec 2019

10.5

6.0

3.0

2.9 1.9

Global

Advanced Emerging

Note: RHS: Total outstanding amount of corporate bonds issued by non-financial companies and outstanding amount due within the subsequent 3 years in 2019 USD. Source: Bank of International Settlements. OECD (2020) Corporate Bond Market Trends, Emerging Risks and Monetary Policy.

US

Europe

China 6

Examples of measures taken

Containment

Quarantines

• •

Mandated: CHN, ITA Self-quarantines: KOR, ESP, FRA, ISR, CZE, etc.

Travel restrictions

•

Flights from IRN, CHN, ITA cancelled in multiple countries

School closures

• •

Large-scale closures: CHN, ITA, JPN, KOR, CZE Targeted closures: FRA, ESP, DEU, DNK

•

Ban/recommendation to cancel mass gatherings: CHN, ITA, ESP, FRA,

Public events cancellations Health

DNK, IND, SVN

•

Ban on hospital visits: HUN, IRL, SWE

• •

Boost support and capacity of healthcare system: CHN, ITA, FRA, USA, etc.

Leverage digital tools to improve surveillance and care: KOR

•

People: Tax delays/exemptions, short-time work schemes, sick leave (CHN, DEU, FRA, IRL, ITA, JPN, NLD, etc.)

Fiscal

Support

•

Firms: Support SMEs and affected sectors (CHN, ISR, IDN, FRA, GBR, ITA, KOR, JPN etc.)

Monetary

•

Cut in interest rates and targeted credit support: USA, CAN, CHN, GBR, AUS

•

Macro-prudential measures: GBR

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Key messages Covid-19 has hit people and livelihoods • Covid-19 (coronavirus) has disrupted people’s life and the global economy • Activity has slowed dramatically in China on the back of containment measures • Negative spillovers via tourism, supply chains, commodities, confidence are growing

The spread of coronavirus could intensify a global downturn • Weakened by trade and political tensions, the global economy is vulnerable • Containment measures and lower confidence would slow affected economies • Pressure on industries with structural difficulties (autos) or that are large employers (tourism)

Governments cannot afford to wait • Increase resources to the health sector and support the most vulnerable • Ensure liquidity buffers for affected industries worldwide • Coordinate health response, monetary and fiscal support across countries

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Thank you For more information https://oecd.org/coronavirus https://twitter.com/oecdeconomy eco.contact@oecd.org