The world economy could be headed towards recovery from a coronavirus-triggered downturn within six months – but only if mass testing is rolled out now and governments guarantee to support demand, a leading investment advisor has suggested.
Stocks held steady on Tuesday, after rallying on tentative indicators the Chinese economy – the world’s second-largest – is stabilising following coronavirus lockdowns being lifted. However, they retreated on Wednesday as the pandemic worsens in the U.S. – the world’s largest economy.
The UN’s latest trade report on Tuesday warned that the world economy will go into recession this year with a predicted loss of global income in trillions of dollars.
“The economic fallout of Covid-19 is as severe as it is unpredictable,” said Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory and services organisations.
“No one knows for sure the full extent of the impact of the public health emergency on the world economy – but a significant downturn is, unfortunately, almost inevitable,” Green said, and added:
“However, the signs from countries where lockdown restrictions are now being eased suggest that the economic downturn could be relatively short-lived if certain factors come into play sooner rather than later.
“Indeed, I believe that the world economy is likely to be headed for recovery from a coronavirus-triggered downturn within six months – but only if mass testing is rolled out now and governments guarantee to support demand.”
Green said that most of the world is currently in phase one: lockdown. The unprecedented lockdown measures are, of course, dramatically slowing economies as both supply and demand are hit.
“The next phase, phase two, needs to be mass testing. An aggressive mass testing agenda, the likes of which could soon happen in Germany according to reports, would allow potentially millions of people to leave lockdown early, get back to work, and help kick start their economies.”
Green added that once mass testing is implemented, “we can expect to see supply increase. But what about the other essential factor: demand? Without it, economies will continue their downward trajectory.”
The coronavirus pandemic has been – and will continue to be for some time – a hammer blow to consumer confidence, the deVere CEO said, explaining that this is why it is essential that governments around the world continue and increase their unprecedented support measures for these unprecedented times.
“G20 leaders must remain committed to fulfilling their pledge to do “whatever it takes” to minimise the social and economic damage of the coronavirus pandemic,” he said.
Speaking to the media recently, the Nigel Green noted: “Investors around the world will now be looking at how China gets back on its feet economically. Did the extreme lockdown work? Were the public health facilities adequate? Will there be another outbreak as activity resumes? How will the authorities kickstart the economy? How will these decisions, and the success of them, impact the rest of the world?”
“I’m confident that financial markets will stage a relief rally when there is a definitive signal that the infection rate is dropping and that cases have peaked. Investors will come off the sidelines and prices will jump. Therefore, the next stage in China’s public health and economic recovery is critical.”
Green said that the coming months will be extremely tough for many individuals, businesses and sectors, but there are also glimmers of hope that economic recovery might arrive relatively soon.
“Ultimately, this will depend on the next two phases. If mass testing is carried out stringently and immediately, we could be looking at recovery signs within six months. If there’s a failure to do this, we could be looking at much longer downturn.
“During these tumultuous times, people are being advised to review and revise their financial planning strategies to ensure they remain on track to reach their long-term financial goals,” Green concluded.