The world economy is in for a mammoth shock this summer – and this is what it will need to do to recover

A sustained and strong bounce back is possible. But the key is getting the detail right, and that could prove to be rather tricky, writes Hamish McRae

A deeper recession than after the 2008 crash is predicted (Getty/iStock)

The scale of the damage to the world economy is starting to become evident. Until now we have been overwhelmed by the flood of news: about the progress of the coronavirus itself, the measures taken by different countries to check its spread, and about the increasingly desperate efforts by governments and central banks to prop up the economy. What we had little feeling for would be the scale of the economic damage.

That data is starting to come through. The purchasing manager indices are traditionally the best forward-looking indicators, and the latest set is glum. The composite Eurozone PMI that has just come out at 31.4 is worse than those after the great financial crisis of 2008-9. The UK number at 37.1 tells the same story. The comparable US number was 40.5, the lowest since October 2009.

The inescapable message is that there will be a recession at least as deep as in 2009, probably deeper. Indeed if you take just the second quarter (April, May and June), the depth is going to be much worse. As far as the US is concerned, Morgan Stanley expects a fall of more than 30 per cent in US GDP, and Goldman Sachs one of 24 per cent.