The Global Economic Impact of COVID-19
Lewis Alexander | George Buckley | Craig Chan | Ting Lu | Chetan Seth | Rob Subbaraman | Sonal Varma
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  • Our base case assumes social distancing eases gradually after April and the unprecedented forces of central bank and fiscal responses are broadly successful in avoiding a full-blown credit crunch, although there is another, smaller, wave of infections in Q4

  • Under a good scenario, actions such as social distancing and medical and technological innovations will beat the virus, but economies will still face a short, deep recession

  • Under a bad scenario, the virus continues to grow exponentially and the cash flow support from monetary and fiscal policies do not last long enough to save companies and jobs

New base case and scenarios

QOQ economic growth by base case and scenarios

The economic cost of lockdowns

Weekly Updated Global Economic Outlook


  • With COVID-19 spreading, we expect real GDP to keep declining for three quarters through Q2, followed by a gradual recovery.

  • We expect core CPI inflation to continue to decelerate and to plunge below 0% y-o-y in Q4 led by lower oil prices.

  • The ¥108trn stimulus package will help keep the economy from falling into a vicious cycle but have a limited impact on demand.

  • The risk is renewed yen appreciation, caused by a full-blown global recession and further risk averse moves in markets.


Asia ex-Japan

  • COVID-19 to derail Asia’s GDP growth to -0.2% y-o-y in 2020, from 5.3% in 2019. 8 out of 10 economies will contract in 2020.

  • After China spillovers in Q1, we expect a sharper growth slump in Q2 due to domestic lockdowns and weaker external demand.

  • A sequential recovery is likely in H2, but at a gradual pace due to spillovers from unemployment and weak corporate profits.

  • Despite the supply-side disruptions, we expect disinflationary pressures due to lower oil prices and weak aggregate demand.

  • Monetary and fiscal policy easing have already been stepped up, but be prepared for even more easing ahead.

  • China: We expect GDP growth to remain negative at -0.5% in Q2 and Beijing to roll out a large stimulus package soon.

  • Korea: Growth will likely contract more sharply in Q2 on slumping external demand; we expect the BOK to cut in Q2.

  • India: COVID-19 amid a weak financial sector to trigger a contraction in 2020 and easy policies – monetary, fiscal and liquidity.

  • Indonesia: Despite a sharp growth downturn, the likelihood of a policy rate hike is rising due to balance of payments fragility.

  • Australia: We see a sharp recession in H1, with unemployment rising from 5.2% to around 9% by year-end.


United States

  • We expect a short, but steep, recession in H1 2020 before a gradual recovery aided by fiscal and monetary accommodation.

  • Responding to a significantly weaker outlook, we expect the Fed to remain at the ELB through 2021.

  • The Fed will implement credit facilities already announced and ensure that long-term rates do not constrain the recovery.

  • We expect additional fiscal stimulus from Washington, but it may be less effective due to social distancing.

  • The unemployment rate will rise sharply, peaking around 15-20% in Q2, as labor market conditions deteriorate due to COVID-19.

  • Core inflation will likely be weighed down by COVID-19’s impact on service prices and excess labor market slack.

  • Notable risks include the failure of social distancing policies as well as corporate credit and financial sector stress.



  • As COVID-19 spreads across Europe, we expect the euro area economy to fall into an even deeper recession in 2020.

  • Lower oil prices and a demand shock caused by COVID-19, should push euro area inflation lower.

  • The ECB announced an additional €750bn of QE, and we think the next ECB move will be a 20bp rate cut in April.

  • We have axed again our UK GDP forecasts and see a recession in H1 – with output falling by more than 15% vs Q4 2019.

  • GDP recovers from H2 though takes time to get back to its pre-virus peak. Loose monetary and fiscal policy remain supportive.

  • The BoE has cut rates to 0.10% and announced €200bn of QE. We do not see any further easing in our base case.

  • The tail risk of a Brexit cliff edge at end-2020 has risen, but the outcome is uncertain with COVID-19 disruption.

Read our weekly updated report here.

Read our full anchor report on COVID-19’s impact on the world economy here.


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