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Covid-19 Causes Most G7 Countries To Lose Four Years Of Economic Growth

  • A new report by The Economist Intelligence Unit (The EIU) shows that BRICS and G7 countries have lost several years of economic output because of the pandemic.
  • The EIU expects the global economy to recover to pre-coronavirus levels in 2022. However, this global forecast masks big disparities between countries.
  • Most economies will start to recover in the third quarter, posting double-digit rates of quarterly growth.
  • However, recovery will start from a low base, given the economic shock experienced in the second quarter.
  • In Asia, India’s economy appears best-placed to recover the fastest. Meanwhile, Japan’s Q3 GDP will be back to 2012 levels. China will not record a recession.

China is an outlier among members of the G7 and BRICS grouping, as the country is the only one that will not record a recession. China is broadly ahead of the pandemic curve, and the Chinese economy started to recover in the second quarter of this year, while output in other developed markets was sinking.

Among G7 and BRICS countries, India looks the best placed to recover the fastest. In July-September India's output will be similar to that registered one year ago, which is an impressive performance by international standards; the country will recover to 2019 GDP levels as early as next year. However, there are high downside risks to this forecast, as India is fast becoming a new coronavirus hotspot, and the lack of a social safety net for many workers will have pushed up poverty levels.

Despite a high coronavirus death toll, the US economic story also looks broadly positive. The country's third-quarter output will be similar to that registered in the same period of 2017. Its economy should be back to pre-coronavirus GDP levels by 2022, highlighting the flexibility of its labour market.

Beyond these two positive examples, the third-quarter output of most G7 countries will be roughly equivalent to that registered during the same period in 2016. In other words, the coronavirus pandemic has wiped out about four years of economic growth for Canada, France, Germany and the UK. Italy is an outlier among G7 countries. In the third quarter of this year Italy's output will be at levels last registered in 1997.

Brazil, Japan, Russia and South Africa will also experience a slower recovery. In July-September we expect that their output will have shrunk to levels last recorded in 2009 (Brazil), 2012 (Japan, Russia) and 2013 (South Africa). In turn, the recovery of these economies to pre-coronavirus GDP levels will be slow; output will not be back to 2019 levels before 2023 (Brazil) or 2024 (Japan, Russia and South Africa).

Agathe Demarais, The Economist Intelligence Unit’s Global Forecasting Director, says:

“Our findings suggest that the third-quarter recovery will be far less impressive than the quarterly growth data will show. Most G7 countries will be back to levels of activity last recorded in 2016. Italy and Japan will be outliers. In July-September, Italy’s output will be equivalent to that recorded in the same period of 1997. Meanwhile, Japan’s output will have shrunk to 2012 levels.”

Ms Demarais adds that “The situation in most BRICS countries is worrying. Brazil, Russia and South Africa have all lost nearly ten years of growth, and they will be in recovery mode until 2024.”

Finally, Ms Demarais says that “The emergence of a second wave would derail the global recovery. If the pandemic re-emerges later this year, as looks likely, recovery may take even longer than we currently expect.”

Real GDP growth rate (%), quarter on quarter

BRICS2020Q12020Q22020Q3GDP back to pre-coronavirus levels in...Q3 2020 GDP level equivalent to...
Brazil-1.6-12.13.3Q2 2023Q4 2009
India0.3-2016.4Q4 2021Q2 2019
Russia-0.9-15.511Q4 2024Q4 2012
South Africa-2-50.911.7Q3 2024Q1 2013
Canada-2.1-6.71.8Q4 2022Q3 2016
France-5.3-15.512.6Q4 2022Q4 2016
Germany-2.2-8.44.1Q4 2022Q1 2016
Italy-5.3-1511.5Q3 2024Q2 1997
Japan-0.6-5.10.4Q4 2024Q1 2012
UK-2-20.618.6Q4 2023Q1 2016
USA-5.0-31.413.2Q3 2022Q3 2017

Source: The Economist Intelligence Unit

Download the EIU’s latest report: A Q3 recovery, what Q3 recovery?

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