DUBAI : Global economic activity levels will remain significantly below normal during the third quarter (Q3) of 2020, despite the relaxation of the strictest Covid-19 pandemic social distancing measures, said Euromonitor International in a new report.

Under the baseline/most likely scenario, the global economy is headed for the worst global recession since the great depression of the 1930s, with global output set to contract by 3–6% in 2020, according to the latest Global Economic Forecasts.

A relatively strong expected recovery in 2021, with growth of 3.5–7%, would still leave global output in 2021 around 5.5% below pre-Covid-19 forecasts, it said.

Even in 2022, Euromonitor expects global output in the baseline / most likely scenario to be around 4.5% below the pre-Covid-19 forecast.

The 2020 global GDP growth baseline forecast has been downgraded by 1.5 percentage points compared to the May forecast, with a 1.2 percentage point downgrade for advanced economies and a 1.7 percentage point downgrade for developing economies. This mainly reflects the worse than expected economic effects of the pandemic in Western Europe, India and Latin America, which emerged during the summer as a new major centre of the pandemic, the report said.

The pandemic has worsened in developing economies, leading to greater than expected hits to economic activity in countries with big informal sectors and less scope for social distancing.

The August forecast also assumes more persistent social distancing effects in h2 2020, and more adverse effects on the productivity of businesses as they make adjustments to reduce Covid-19 infection risks (e.g. more resources devoted to hygiene and social distancing measures).

The level of uncertainty facing the global economy remains unprecedented, related to risks of further Covid-19 pandemic waves and possible delays in the production and wide distribution of a vaccine or treatment. The baseline forecast is only assigned a 41–51% probability, with the remainder going to more adverse Covid-19 pessimistic scenarios.

In the August global economic outlook, we have made a comprehensive revision of the Covid-19 pessimistic scenarios, based on more information and understanding about possible Covid-19 pandemic effects and risks since March 2020.

Recent shifts in the dynamics of the pandemic, especially in the US and Europe, raise concerns of a major second pandemic wave.

The Covid-19 pessimisticscenario is now the main global second wave scenario, featuring a much slower global recovery in 2021 compared to the baseline forecast. The baseline forecasts assume that a vaccine is available for widespread distribution around mid-2021. This is based on an unprecedented epidemiologic research effort with several promising candidates.

However, the previous fastest vaccine development took around 4 years. Complications in vaccine development and deployment could cause further risks to the baseline outlook, also captured by pessimistic scenarios.

“Our Covid-19 pessimistic scenarios have now been revised to account for risks of a more delayed roll-out of an effective Covid-19 vaccine or treatment in 2022–2023,” Euromonitor said in the report.