For optimists who hoped the global economy would recover from the impact of the coronavirus pandemic within months, New York Federal Reserve Board President John Williams has delivered a wake-up call.
In an interview on CNBC’s “Squawk Box” on Friday (April 17), Williams said that while construction may be among the first sectors to rebound, the remainder of the economy likely won’t be recovered by the end of 2020.
“I expect that to be able to bounce back a little bit more quickly than maybe some of the other sectors,” he said. “But I don’t see the economy getting back to full strength by the end of the year.”
Williams told the network that while he is hopeful about long-term economic growth, he expects tough days are coming. He said that economic data from the second quarter, April through June, is likely to be “horrible.”
“We have not come to any firm conclusions about how long this will last, and we’re acting in every way we can to do the utmost to support the economy, however this evolves over the next couple months,” Williams said. “Our concerns are that even as the pandemic passes, even as the restrictions are relaxed gradually over time, people may take quite a while before they’re willing to get back on airplanes or trains or go to theaters and concerts, things like that.”
Gita Gopinath, chief economist at the International Monetary Fund (IMF), said the global economy may not fully recover from COVID-19 even by 2021. She told CNBC’s “Squawk Box Asia” on Friday (April 17) that the world economy is expected to shrink by 3 percent this year before it surges by nearly 6 percent next year.
“So even by the end of 2021, we’re expecting level of economic activity to be below what we had projected before the virus,” she said. “We have a recovery projected for 2021 of 5.8 percent growth, but that is a partial recovery.”
Gopinath praised governments and financial institutions' aggressive and rapid action to assist businesses and the public to fight and survive the crisis. “I think if you compare that to the global financial crisis ... the response has been just that much speedier, and the scale of it has been that much bigger,” she said.
Still, she noted that while many nations have stepped up with stimulus packages, others have not. “The concern we have is more about developing and emerging economies that have less of a fiscal space [and] have to deal with external account problems, and I think they’re in a tougher spot,” she said.