Things didn’t go as planned, apparently

We had great hopes for 2020. Brexit tensions had been soothed; the U.S. and China had signed the first phase of a broader trade pact. Then coronavirus struck.

Last week, I had shared with you my ‘advance’ predictions about the differences between expectations before and after the coronavirus outbreak. Now, allow me to conduct a deeper analysis so as to examine this issue by taking various scenarios into account as well.

“Global growth expectations had already been revised back to 2.6% from 3.3% long before the coronavirus outbreak. I thought that they would be revised upwards” That’s what Can Fuat Gürlesel, a fellow economist, told me during a conversation we recently had. Then coronavirus struck, making expectations evolve around two main scenarios.

According to the first scenario, it is projected that global growth will decline only 0.1 percentage point if the outbreak ends before the end of April. I personally would expect a 0.2 percentage point decrease in such an event, just be on the safe side.

In a second scenario where the outbreak continues until the end of the year, global growth is expected to decline 0.6 percentage point to 2.0%. Feeling more optimistic about this scenario, I say there will be a 0.4 percentage point decrease. No matter which of these scenarios becomes a reality, we are headed toward some hard times.

Let’s analyse the future expectations for the World Trade on the same set of scenarios:

According to the first scenario, global trade may decline 0.5 percentage point to 2.0% with the end to the novel coronavirus in April. I actually agree with this scenario but the second one indicates refers to more desperate times.

“Central Banks should pay attention to the global conjuncture as well…”

If things don’t improve soon, global trade volume growth may decline to around 0.5%, which is quite critical indeed. According to our original expectations for this year, trade volume growth would increase by 2.5% and the value of global trade would increase by 3.0%. Export prices would go up compared to the last year, companies would start making profit.

No one really talks about how far the volume will fall vis-à-vis an estimated growth rate 0.5% for world trade. I guess we’ll have our chance to analyse this issue over the upcoming days. No need to make ourselves unhappy already.

We have several scenarios and negative expectations in hand. I think my review on the dollar’s situation I mentioned in my previous article needs to be re-reviewed from this perspective. By the way, U.S. mistrust of China’s coronavirus numbers does not go unnoticed either while false rumours on Wuhan Virus are spreading online faster than the outbreak itself.