DUBAI – BlackRock’s Managing Director Amer Bisat said on Wednesday that the world economy could contract by 11% in the first half of 2020 and lose $6 trillion in economic output due to the coronavirus pandemic.
“To put this in context, this will be worse than the contraction that we saw in 2008, it will be worse than the one that people estimate happened during the (1918) Spanish flu,” Bisat said.
“It won’t be as bad as the (1930s) Global Depression, which is a significantly worse contraction, but it will certainly be the second-worst economic shock that we’ve seen globally.”
BlackRock is the world’s largest asset manager.
Conservatively, 5 million jobs could be lost in January-June, Bisat told a virtual panel discussion moderated by the Carnegie Middle East Center. The picture looks even worse when under-employment, reduced hours and reduced wages are taken into account, he added.
Asked if the policy reaction so far has been commensurate to the shock, Bisat said: “Politically, the answer is categorically no.”
But he praised the economic measures taken by governments and central banks.
“Just the announced amount of fiscal stimulus that has been thrown globally at the problem between February and March … is $5 trillion worth of fiscal inputs that will be thrown over the global economy for the next probably six months or so.
“To that you add 65 cases of interest rate cuts, you have 20-odd countries that have already announced some form of quantitative easing. How do you translate all this into stimulus?” Bisat said. “It’s complicated, but the reality is this is unprecedented.”
Bisat likened the economic shock from the pandemic to a natural disaster, which he said usually “leads to a strong recovery afterwards”.
The recovery from the coronavirus’s impact “is not likely to be as aggressive”, however, due to uncertainty around when the shock will end, the possibility the virus will re-emerge, and its global nature.
But after the strong policy measures taken and pent-up demand, “there’s no question in my mind that the recovery will be very, very sharp afterwards.”
“It will look like a V. The question to me is: will the size of the V be so powerful that it will offset the lost output from the downside? I think the answer is no,” Bisat said, adding he estimated “we will lose 2 to 3 percentage points of global GDP that we will never see again”.
Speaking about Lebanon, where a financial crisis exacerbated by months of political instability has brought much of the economy to a halt, Bisat said the coronavirus pandemic could push a forecast contraction to “higher double digits”.
He said the country was in urgent need of external financing, adding: “Any international support right now would desperately need the umbrella of the IMF.”