Virus Slump Expected to Rival History's Biggest Recessions

The projected downturns would only be eclipsed in recent decades by war and the Great Depression.

A sparsely occupied Fifth Avenue in New York, March 18, 2020.
A sparsely occupied Fifth Avenue in New York, March 18, 2020.
Evan Agostini/Invision/AP

LONDON (AP) — The coronavirus-related recessions around the world are going to be bad — and for some of the world's major industrial nations the worst that anyone alive has experienced, according to analysts at Deutsche Bank.

In a wide-ranging report using data that in parts goes back 800 years, Jim Reid and Henry Allen found that the downturns are in many cases set to be deeper than those endured in the immediate aftermath of the global financial crisis 12 years ago — and then some.

Though forecasting is difficult given the prevailing uncertainties, Deutsche Bank, like others, has slashed its growth forecasts amid the coronavirus pandemic that's seen many countries impose unprecedented peacetime restrictions on economic activity.

The bank expects France, Germany, Italy, Japan, the U.K. and the U.S. to shrink by between 4% and 9% in 2020, figures that in most cases have only been eclipsed in recent decades by war and the Great Depression of the 1930s. Germany is the outlier, its economy decimated by around four-fifths around the time of the defeat of the Nazis in World War II. Nazi Germany's ally Japan saw its economy shrink by around a half in 1945.

“These are unimaginable numbers for today’s developed economies, having not been seen since World War II,” said Reid and Allen.

The only parallels in modern times, they say, would be states ravaged by war or deep crisis, like Libya or Venezuela.

The 4.2% annual decline in GDP that Deutsche Bank economists have pencilled in for the U.S. in 2020 would make 2020 the 9th largest since 1900 and deeper than anything recorded in any one year after the global financial crisis. The 9.5% quarter-on-quarter contraction Deutsche Bank expects for the second quarter in the U.S. would “easily make it the largest quarterly contraction” since 1947, the first date for which equivalent figures exist.

For France, Germany and Italy, the worst years are overwhelming a result of war, but the anticipated virus-related slumps feature in the lists of the deepest recession seen in peacetime. The 5.3% contraction Deutsche Bank analysts anticipate in Germany this year would be the 10th worst year since 1851, just shy of the 5.6% contraction recorded in 2009.

And Japan's anticipated recession of 3.9% — modest compared with the other major economies — is set to be its sixth worst since 1871.

England, now part of the U.K., has the longest data set available, with the Bank of England providing annual growth rates all the way back to the 13th century.

Though the 10 worst years are all before the Industrial Revolution when a mainly agricultural economy depended on climatic variations, Reid and Allen say Deutsche Bank's forecast for an anticipated 6.5% contraction this year would be the third-largest since 1900, with only the recessions of 1921 and 1919 worse.

“2020 will likely end up being an extraordinary year in the history books,” Reid and Allen said.

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