Little did we know, as we entered a new decade, what was in store for the global economy in 2020. Around the globe, the Covid-19 pandemic has inflicted a huge human cost. The response, and the measures to reduce the spread of the virus have inevitably had a significant impact on global economic activity.
A recent Organisation for Economic Co-operation and Development (OECD) outlook, cautioned, ‘as restrictions begin to be eased, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections. With or without a second outbreak, the consequences will be severe and long-lasting.’ With business activity frozen in many sectors, confidence has understandably been undermined.
With lockdowns now easing in some regions and economies beginning to reopen, many major indices have rebounded from the lows reached in March as the pandemic took hold.
On home shores
In the UK, recent ONS data highlighted the UK economy contracted in April by 20.4%, the largest monthly contraction on record. The OECD data showed the UK is likely to be one of the hardest hit major economies due to its service-based nature. The Bank of England’s Monetary Policy Committee (MPC) recently increased the size of its bond-buying programme to help fight the coronavirus-induced downturn. The MPC expressed in their minutes, that the fall in global GDP in Q2 will be less severe than expected and there are signs that services output and consumer spending are picking up.
As concerns about a second spike of infection surfaced in the US in June, Steven Mnuchin, US Treasury Secretary, ruled out shutting down the US economy again. International Monetary Fund data for the 19-country Eurozone, revealed growth across the bloc contracted by 3.8% in Q1. As lockdown measures eased, European markets have rallied, but should there be a ‘second wave’ of Covid-19 infections it will dampen optimism.
Output in China contracted during Q1, the first recorded contraction since at least 1992. Chinese authorities will not be establishing growth targets this year. The country faces significant challenges, with a struggling economy and rising international hostility.
Uncertain times, keep talking
Uncertainty surrounds the future spread of the virus and the success of efforts to develop a vaccine and therapies to counter it, making it challenging to predict the path for the global economy.
A well-defined investment plan, that considers your personal circumstances, can help you weather market storm. Volatility is a timely reminder to keep your investments under regular review. We want to reassure you that we understand the challenges you may face and are here to support you.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.