“We envisage a slowdown in the global economy to under two per cent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD.
Launching the UNCTAD report as world financial markets tumbled over concerns about supply-chain interruptions from China, and oil price uncertainty among major producers, Mr. Kozul-Wright warned that few countries were likely to be left unscathed by the outbreak’s financial ramifications.
Doomsday scenario
One “Doomsday scenario” in which the world economy grew at only 0.5 per cent, would involve “a $2 trillion hit” to gross domestic product, he said, adding that collapsing oil prices had been “a contributing factor to that growing sense of unease and panic”.
While it was difficult to predict how the international financial markets will react to COVID-19’s impacts “what they do suggest is a world that is extremely anxious”, he said.
“There’s a degree of anxiety now that’s well beyond the health scares which are very serious and concerning.”
Spend now, to avoid meltdown later
To counter these fears, “Governments need to spend at this point in time to prevent the kind of meltdown that could be even more damaging than the one that is likely to take place over the course of the year”, Mr. Kozul-Wright insisted.
Asked about how different countries might react to the crisis including China – where the virus first emerged in December – and the United States, the senior UN economist said that the Chinese Government would likely introduce significant “expansionary measures” – shorthand for increasing spending or tax cuts.
“It will almost certainly do that,” he said. “Will the US Government in an election year, which is where we are…also need to respond in a way other than simply cutting taxes and reducing interest rates? I suspect it will do.”
Turning to Europe and the Eurozone, Mr. Kozul-Wright noted that its economy had already been performing “extremely badly towards the end of 2019”.
Europe facing recession
It was “almost certain to go into recession over the coming months; and the Germany economy is particularly fragile, but the Italian economy and other parts of the European periphery are also facing very serious stresses right now as a consequence of trends over (the last few) days.”
Describing many parts of the Latin American region as similarly vulnerable, he added that Argentina in particular “will be struggling as a consequence of the knock-on effects of this crisis”.
Commodity-rich countries face hit from stronger dollar
So-called Least Developed Countries, whose economies are driven by the sale of raw materials, will not be spared either.
“Heavily-indebted developing countries, particularly commodity exporters, face a particular threat”, thanks to weaker export returns linked to a stronger US dollar, Mr. Kozul-Wright maintained. “The likelihood of a stronger dollar as investors seek safe-havens for their money, and the almost certain rise in commodity prices as the global economy slows down, means that commodity exporters are particularly vulnerable.”
“Ultimately,” Mr. Kozul-Wright added, “a series of dedicated policy responses and institutional reforms are needed to prevent a localized health scare in a food market in Central China from turning into a global economic meltdown”.
Threat of pandemic ‘very real’: Tedros
Although the threat of COVID-19 becoming an official pandemic “has become very real”, the world is “not at the mercy of the virus”, said the World Health Organization (WHO) head, Tedros Adhanom Ghebreyesus, briefing journalists in Geneva on Monday.
He said it was important not to let grim milestones such as passing the infection rate of 100,000 worldwide, sap resolve to contain the disease, stressing that 93 per cent of deaths so far have been in just four countries.
It would be “the first pandemic in history that could be controlled. The bottom line is, we are not at the mercy of the virus”, he added.
OTTAWA – Statistics Canada says real gross domestic product grew 0.2 per cent in July, following essentially no change in June, helped by strength in the retail trade sector.
The agency says the growth came as services-producing industries grew 0.2 per cent for the month.
The retail trade sector was the largest contributor to overall growth in July as it gained one per cent, helped by the motor vehicles and parts dealers subsector which gained 2.8 per cent.
The public sector aggregate, which includes the educational services, health care and social assistance, and public administration sectors, gained 0.3 per cent, while the finance and insurance sector rose 0.5 per cent.
Meanwhile, goods-producing industries gained 0.1 per cent in July as the utilities sector rose 1.3 per cent and the manufacturing sector grew 0.3 per cent.
Statistics Canada’s early estimate for August suggests real GDP for the month was essentially unchanged, as increases in oil and gas extraction and the public sector were offset by decreases in manufacturing and transportation and warehousing.
This report by The Canadian Press was first published Sept. 27, 2024.
TORONTO – Canada’s main stock index closed above 24,000 for the first time Thursday as strength in base metals and other sectors outweighed losses in energy, while U.S. markets also rose and the S&P 500 notched another record as well.
“Another day, another record,” said Angelo Kourkafas, senior investment strategist at Edward Jones.
“The path of least resistance continues to be higher.”
The S&P/TSX composite index closed up 127.95 points at 24,033.83.
In New York, the Dow Jones industrial average was up 260.36 points at 42,175.11. The S&P 500 index was up 23.11 points at 5,745.37, while the Nasdaq composite was up 108.09 points at 18,190.29.
Markets continue to be optimistic about an economic soft landing, said Kourkafas, after the U.S. Federal Reserve last week announced an outsized cut to its key interest rate following months of speculation about when it would start easing policy.
Economic data Thursday added to the story that the U.S. economy remains resilient despite higher rates, said Kourkafas.
The U.S. economy grew at a three-per-cent annual rate in the second quarter, one report said, picking up from the first quarter of the year. Another report showed fewer U.S. workers applied for unemployment benefits last week.
The data shows “the economy remains on strong footing while the Fed is pivoting now in a decisive way towards an easier policy,” said Kourkafas.
The Fed’s decisive move gave investors more reason to believe that a soft landing is still the “base case scenario,” he said, “and likely reduces the downside risks for a recession by having the Fed moving too late or falling behind the curve.”
North of the border, the TSX usually gets a boost from Wall St. strength, said Kourkafas, but on Thursday the index also reflected some optimism of its own as the Bank of Canada has already cut rates three times to address weakening in the economy.
“The Bank of Canada likely now will be emboldened by the Fed,” he said.
“They didn’t want to move too far ahead of the Fed, and now that the Fed moved in a bigger-than-expected way, that provides more room for the Bank of Canada to cut as aggressively as needed to support the economy, given that inflation is within the target range.”
The TSX has also been benefiting from strength in materials after China’s central bank announced several measures meant to support the company’s economy, said Kourkafas.
However, energy stocks dragged on the Canadian index as oil prices fell Thursday following a report that Saudi Arabia was preparing to abandon its unofficial US$100-per-barrel price target for crude as it prepares to increase its output.
The Canadian dollar traded for 74.22 cents US compared with 74.28 cents US on Wednesday.
The November crude oil contract was down US$2.02 at US$67.67 per barrel and the November natural gas contract was down seven cents at US$2.75 per mmBTU.
The December gold contract was up US$10.20 at US$2,694.90 an ounce and the December copper contract was up 15 cents at US$4.64 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in the base metal sector, while U.S. stock markets were also higher.
The S&P/TSX composite index was 143.00 points at 24,048.88.
In New York, the Dow Jones industrial average was up 174.22 points at 42,088.97. The S&P 500 index was up 10.23 points at 5,732.49, while the Nasdaq composite was up 30.02 points at 18,112.23.
The Canadian dollar traded for 74.23 cents US compared with 74.28 cents US on Wednesday.
The November crude oil contract was down US$1.68 at US$68.01 per barrel and the November natural gas contract was down six cents at US$2.75 per mmBTU.
The December gold contract was up US$4.40 at US$2,689.10 an ounce and the December copper contract was up 13 cents at US$4.62 a pound.
This report by The Canadian Press was first published Sept. 26, 2024.
