Covid-19 Recession Will Be Deeper Than the Great Financial Crisis


Economists at IHS Markit downgraded their economic forecast to a deep recession.

Please consider COVID-19 Recession to be Deeper Than That of 2008-2009

Our interim global forecast is the second prepared in March and is much more pessimistic than our 17 March regularly scheduled outlook. It is based on major downgrades to forecasts of the US economy and oil prices. The risks remain overwhelmingly on the downside and further downgrades are almost assured.

IHS Markit now believes the COVID-19 recession will be deeper than the one following the global financial crisis in 2008-09. Real world GDP should plunge 2.8% in 2020 compared with a drop of 1.7% in 2009. Many key economies will see double-digit declines (at annualized rates) in the second quarter, with the contraction continuing into the third quarter.

It will likely take two to three years for most economies to return to their pre-pandemic levels of output. More troubling is the likelihood that, because of the negative effects of the uncertainty associated with the virus on capital spending, the path of potential GDP will be lower than before. This happened in the wake of the global financial crisis.

Six Key Points

  1. Based on recent data and developments, IHS Markit has slashed the US 2020 forecast to a contraction of 5.4%.
  2. Because of the deep US recession and collapsing oil prices, IHS Markit expects Canada's economy to contract 3.3% this year, before seeing a modest recovery in 2021.
  3. Europe, where the number of cases continues to grow rapidly and lockdowns are pervasive, will see some of the worst recessions in the developed world, with 2020 real GDP drops of approximately 4.5% in the eurozone and UK economies. Italy faces a decline of 6% or more. The peak GDP contractions expected in the second quarter of 2020 will far exceed those at the height of the global financial crisis.
  4. Japan was already in recession, before the pandemic. The postponement of the summer Tokyo Olympics will make the downturn even deeper. IHS Markit expects a real GDP contraction of 2.5% this year and a very weak recovery next year.
  5. China's economic activity is expected to have plummeted at a near-double-digit rate in the first quarter. It will then recover sooner than other countries, where the spread of the virus has occurred later. IHS Markit predicts growth of just 2.0% in 2020, followed by a stronger-than-average rebound in 2021, because of its earlier recovery from the pandemic.
  6. Emerging markets growth will also be hammered. Not only are infection rates rising rapidly in key economies, such as India, but the combination of the deepest global recession since the 1930s, plunging commodity prices, and depreciating currencies (compounding already dangerous debt burdens) will push many of these economies to the breaking point.

No V-Shaped Recovery

With that, Markit came around to my point of view all along. Those expecting a V-shaped recovery are sadly mistaken.

I have been amused by Goldman Sachs and Morgan Stanley predictions of a strong rebound in the third quarter.

For example Goldman Projects a Catastrophic GDP Decline Worse than Great Depression followed by a fantasyland recovery.

Other GDP Estimates

Delusional Forecast

Advice Ignored by Trump

Fast Rebound Fantasies

I do not get these fast rebound fantasies and neither does Jim Bianco. He retweeted a Goldman Sachs estimate which is not the same as endorsing it.

I do not know how deep this gets, but the rebound will not be quick, no matter what.

Fictional Reserve Lending

Please note that Fictional Reserve Lending Is the New Official Policy

The Fed officially cut reserve requirement s of banks to zero in a desperate attempt to spur lending.

It won't help. As I explain, bank reserves were effectively zero long ago.

US Output Drops at Fastest Rate in a Decade

Meanwhile US Output Drops at Fastest Rate in a Decade

In Europe, we see Largest Collapse in Eurozone Business Activity Ever.

Lies From China

If you believe the lies (I don't), China is allegedly recovered.

OK, precisely who will China be delivering the goods to? Demand in the US, Eurozone, and rest of the world has collapse.

We have gone from praying China will soon start delivering goods to not wanting them even if China can produce them.

Nothing is Working Now: What's Next for America?

On March 23, I wrote Nothing is Working Now: What's Next for America?

I noted 20 "What's Next?" things.

It's a list of projections from an excellent must see video presentation by Jim Bianco. I added my own thoughts on the key points.

The bottom line is don't expect a v-shaped recovery. We will not return to the old way of doing business.

Globalization is not over, but the rush to globalize everything is. This will impact earnings for years to come.

Finally, stimulus checks are on the way, but there will be no quick return to buying cars, eating out, or traveling as much.

Boomers who felt they finally had enough retirement money just had a quarter of it or more wiped out.

It will take a long time, if ever, for the same sentiment to return. Spending will not recover. Boomers will die first, and they are the ones with the most money.

Mike "Mish" Shedlock

Comments (45)
No. 1-16

A shame to go thru all this and what is to come and then reconstruct the same elite system.


Civil disorder is a month away if that 1200 is all there is. People are gonna get desperate.


Yes the Financial repercussions of this virus will effect everyone for many years to come!


It will be deeper for sure. But not as long. We come out of this by mid-September and slowly things will begin improving in Q4.


The world has been stunned by this latest Chinese Horseshoe bat plague, the second in 17 years. The notion that China can brush this one off and sustain the status quo going forward is laughable. It's over. I can hear the supply line stampede out of Guangdong from here.

When politicos domestically discover the seething resentment of millions of newly-unemployed about what's happened to them, the media's fashionable coddling of the China CCP era will be over. It will be over in China also, not long after.

We've fed the Chinese CCP dragon for 42 years; It just bit us...again.


This is what I read earlier today. If it comes true...Yikes!

"We investigate the optimal duration of the COVID-19 suppression policy. We find that absent extensive suppression measures, the economic cost of the virus will total over $9 trillion, which represents 43% of annual GDP."


I just wished it wasn't called a covid-19 recession as if a virus was to blame. This was long in the making; call it kicking the can, black swan or bubble looking for a pin.


@Mish When I try to comment, I get a popup asking for my user name. I'm already logged in. Entering an "unknown" name satisfies the popup. Weird.


Irresponsible debt is the source of most financial crises. So how does the government respond? Add $2Trillion of irresponsible debt to the Federal ledger.

Welcome to the Greater Depression, brought to you by the brainiacs in Washington DC and NYC.


Most will remain in the denial stage for years to come.
A Second Great Depression that lasts twenty plus years is not easy to digest quickly. The evolution of its coming pain and suffering will be long, sad, and extremely hurtful. In history the pain that is coming either destroys empires completely or it makes them ever stronger in the long run. The coming of this reality will show us what the youth of America are truly made of. It will make them stronger, wiser, more innovative or it will decimate them and their future.
Maybe they will figure out the difference between the US Constitution, conservatism and its freedoms vs their love for socialism and communism.
For we old timers...we shall exit life soon as we age out.
My instincts tell me the youth of America lack faith in God and true grit.
Most are snowflakes that know not The Art of War.
Time will tell.


Silver lining: this 'recession' turns out to be worse than the Great Depression, and, this is the silver lining, despite the Keynesian and monetarist "print money" schemes, which have a lot of overlap (especially the MMT monetarists who don't believe in backing the printed money with government bonds), that NOTHING GOOD HAPPENS to the economy except hyperinflation. What's the silver lining? Well after complete collapse and hyperinflation, a new generation of economists will say: "We admit Keynesianism and Monetarism don't work". Be thankful for small favors?


Covid-19 is now third leading cause of death in the US. In a week it will be the leading cause of death in the us. 1049 deaths from Covid-19, 152 from the flu. This is much worse than the flu. Been saying that since early January, although it was a "what if". Now it is a "is now" situation. Even though I was more concerned than most, I still didn't really appreciate the "reality" of it. We haven't seen the worst, and 10 million people are newly unemployed, with no end in site.
When China shut down, i thought that was bad, nothing being produced, where are we going to get the "stuff" to buy. Now they are trying to get back to it, but there is no one to buy the "stuff" even if they produce it.
So I guess the question I am starting to ask is, Is this going to be lessening in mid-June or is this a years long type of thing.
mid-June and i think we just barely miss the "depression" label (maybe), but if it is years long, this is catastrophic. Will the boomers wise up and realize that every penny they saved to try and retire are going to be worthless if all we do is print money and hand it to every person and business we can think of?
Is the US government really going to try and spend 2 trillion a month until this is over? And will the fed just buy it all the debt?
That is insane beyond reason..... NO?


This calls for a GIANT HFT and PPT-driven rally of just about all stocks you can think of which should NOT go up.


"U.S. intelligence reports from January and February warned about a likely pandemic."

Ass-covering bullshit from IC stenographers posing as reporters from the Washington Post.

It is the responsibility of the National Center for Medical Intelligence (NCMI) "to monitor, track and assess a full range of global health events that could negatively impact the health of U.S. military and civilian populations." - Wikipedia

Anybody hear any warnings from these worthless government "workers"?

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