Coronavirus could trigger global recession: Rabobank
If the new coronavirus Covid-19 turns into a global pandemic, economists at Rabobank foresee an economic recession in large parts of the world, including the Netherlands, Germany, Japan, Italy, and the United States. "This economic crisis could become even worse if it turned into a financial crisis, for example when the number of bankruptcies increase sharply worldwide," the Rabobank economists said, the Telegraaf reports.
The economic crisis can turn into a financial crisis if public life in many countries comes to a halt. Then factories produce less, consumers spend less, and consumer confidence drops.
Worldwide, the economy was likely to grow 2.9 percent this year, but with the coronavirus outbreak that figure is more like 1.6 percent, the bank projected. A full on pandemic could reduce growth even further to just 0.7 percent. At home in the Netherlands, the banks said without coronavirus they projected 1.4 percent economic growth this year, down to 0.7 percent because of the outbreak. Conditions under a pandemic would see the country's economy shrink by 0.2 percent, the bank predicted.
The Netherlands would handle the crisis better than the Eurozone as a whole, which could see its economy shrink by 0.8 percent.
The coronavirus halves economic growth this year
Italy is already starting to face these problems. The extent of the Covid-19 outbreak reached such proportions that the Italian government put the Lombardy region and 14 other provinces under lockdown. Milan - the country's financial capital - is also affected by this lockdown. The Dutch Ministry of Foreign Affairs escalated its travel advice for large parts of Italy to code red, completely discouraging visits to the region.
It is "crystal clear" that the coronavirus will have a "huge negative impact on the economy" in Italy, Rabobank economist Maartje Wijffelaars said to Trouw. The partial quarantine in the Italian provinces affects 16 million people - about a quarter of Italians. But the economic consequences will stretch much further, Wijffelaars said.
"Not only is the production declining further, but it is also unclear to what extent the things that are still being produced can even leave the country. So it is a fact that Italy is going to lose out on a lot of money. We thought last week that the Italian economy would shrink by 0.6 percent in 2020, but it will be much worse," Wijffelaars said to the newspaper.