The disruption relating to the coronavirus is set to cause the steepest fall in global GDP since the Second World War. We are forecasting a 5½% contraction this year, far bigger than the 0.5% fall seen during the global financial crisis. Once the virus is under control output should rebound, but it will take years to return to its pre-virus path. Central banks are acting boldly and could yet resort to more drastic measures, while fiscal support will see public debt surge. This might imply a danger of future inflation. But we think that the disinflationary effects of weaker demand will dominate, at least over our forecast horizon.
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