The coronavirus pandemic will push the euro zone and Britain into recession this year, with their economies expected to shrink by as much as 2%, the international ratings agency S&P Global warned today.
"The euro zone and UK are facing recessions. We now expect GDP (gross domestic product) to fall around 2% this year due to economic fallout from the coronavirus pandemic," it wrote in a report.
The spread of Covid-19 has forced three billion people around the world into lockdown and economists say the restrictions could cause the most violent recession in recent history.
Central banks and governments have rolled out a wave of unprecedentedly large fiscal and monetary policy packages to shore up their economies.
To prevent a credit crunch, central banks have injected liquidity and cut rates to lower banks' refinancing costs and have implemented large asset purchase programmes.
S&P said a 2% recession would amount to a loss in real GDP of about €420 billion in 2020, compared with its previous forecast from November 2019.
"We expect a gradual rebound of at least 3% in 2021," the agency said.
S&P said that "swift and bold policy responses taken now are key to avoiding permanent losses to GDP later."
"Risks are still to the downside, as the pandemic might last longer and be more widespread than we currently envisage. For example, we estimate a lockdown of four months could lower euro zone GDP by up to 10% this year," it said.
Looking at individual countries, S&P is pencilling in economic contraction of 2.6% for Italy, the hardest-hit country by the pandemic, and Spain's economy is expected to shrink by 2.1%.
The agency is forecasting a 1.9% contraction in GDP for both Germany and Britain and 1.7% for France.
Another ratings agency, Moody's, yesterday forecast that the world's 20 most industrialised countries would likely suffer a recession this year because of the Covid-19 pandemic.
It estimated that the G20's overall GDP would contract by 0.5%, with the US economy shrinking by 2% and the euro zone by 2.2%.
China, however, despite suffering an outbreak of the novel coronavirus before everyone else, could see economic activity expand by 3.3%, a level that is nonetheless well below average for the world's second biggest economy.
G20 leaders are to hold an online summit today after criticism the group has been slow to address the crisis.