Pandemic Triggers Record Recession in Asia, Europe and the Americas

RIO DE JANEIRO, BRAZIL – After India on Monday, Brazil reported on Tuesday a historic drop in its Gross Domestic Product (GDP) in the second quarter, a tumble suffered by nearly all the world’s major economies due to the Covid-19 pandemic. Only China has escaped the recession.

Brazil, Latin America‘s largest economy, announced on Tuesday a record 9.7 percent drop in its GDP between April and June. The second most battered country by the pandemic, with over 121,000 deaths, the South American giant officially entered recession after a (revised) 2.5 percent decline in the first quarter.

According to economists, the definition of entering a recession is when a country’s GDP declines for two consecutive calendar quarters.

“GDP is now at the same level as at the end of 2009, at the peak of the international financial crisis,” explained the Brazilian Institute of Geography and Statistics (IBGE) in a note.

India, another emerging giant that is paying a high price for Covid-19 (more than 65,000 deaths), reported 24 hours earlier an unprecedented GDP drop of 23.9 percent year-on-year. However, it did not mean entering a recession, since New Delhi has reported a 3.1 percent GDP growth between January and March.

In the United States, the world’s largest economy, there was a 9.5 percent slump in the second quarter, after a 1.3 percent drop in the first, according to data released by the Organization for Economic Cooperation and Development (OECD).

American government statistics publish variations at an annualized rate (-32.9 percent in the second quarter), like Canada, which on Friday lamented an unprecedented 38.7 percent drop in its GDP in the spring (fall in Brazil).

China emerges from the shadows

The only sign of a light in the dark comes from the second-largest economy in the world: China averted recession by containing the epidemic. Its GDP rebounded 11.5 percent in the second quarter, after a ten percent drop in the first. In one year, there was a 6.8 percent slump in the first quarter and a 3.2 percent rebound in the second.

However, this growth level remains much lower than China has recorded in recent decades.

Japan had three more difficult months: in the second quarter, its GDP declined 7.8 percent in relation to the January-March period. This is the steepest drop since comparable data were established in 1980, and the third consecutive quarter of GDP contraction.

Europe plunged into recession

In the Old Continent, the whole eurozone saw its GDP contract 12.1 percent in the spring, after -3.6 percent in the preceding quarter, “by far” the most significant drop “since official records began in 1995” by the European Statistical Office Eurostat.

Germany, Europe’s largest economy, saw its GDP plummet 9.7 percent in the second quarter after dropping two percent in the first.

Less affected by the pandemic than other countries on the continent, it sent a small beacon of hope on Tuesday when it revised its projection of a drop in economic activity to -5.8 percent from -6.3 percent as previously projected.

For France, which experienced a more severe and longer confinement than its neighbor across the Rhine, the impact is more severe, with GDP plummeting 13.8 percent in the spring after -5.9 percent between January and March. The previous worst quarterly fall since the post-war period recorded by the National Institute of Statistics had been in the spring of 1968, due to the May general strike.

Italy, which was experiencing slow growth before the health crisis and with its wealthiest region, Lombardy, as the epicenter of the European pandemic for several weeks, went into recession with a GDP drop of 5.4 percent in the first quarter, and then a further 12.4 percent in the second.

Spain saw its economy shrink 18.5 percent in the second quarter, after 5.2 percent in the first, including a 60 percent drop in tourism revenues in the spring and a decline of over one-third in exports.

The United Kingdom, the European country most affected by the pandemic, is experiencing the continent’s worst recession, while its economy remains linked to that of the EU until the end of the year. GDP plunged 20.4 percent in the second quarter, after retreating 2.2 percent in the first.

As for Russia, its economy contracted 8.5 percent in the second quarter in a year, according to the first estimate by Rosstat statistics agency. In addition to the impact of the pandemic, the Russian giant also suffered from the oil crisis.

Source: Exame