Coronavirus, as well as heightening geopolitical and trade tensions, is expected to drive the world to the brink of a global recession this year, according to independent financial services and advisory organisation deVere.
Nigel Green, deVere founder and chief executive, said it was a stark warning which came as European, Asia-Pacific and US stocks fell on Wednesday in a global market sell-off triggered by concerns over the coronavirus outbreak.
The ASX 200 fell 2%, in the US, the Dow Jones and S&P 500 fell more than 3% as did the Nikkei 225 and the FTSE 100 fell 2%.
“Investors have largely been caught off-guard by the serious and far-reaching economic consequence of the coronavirus,” Green said.
“However, it does seem that this week the world is waking up to the reality of the situation as the containment of coronavirus hasn’t yet materialised and confirmed cases soar in different countries.”
It comes at a time when major economies including Japan, Germany, India and Hong Kong were already facing a serious downtown.
Coronavirus was one issue for the year, but Green said investors needed to also consider the impact of the US election, tensions between the US and Iran and the US/China trade war.
“China’s current economic slowdown will reduce the country’s ability to buy US$200bn more US goods, as promised in the Phase One trade deal. And that was the ‘easy’ bit,” Green said.
“Phase Two is more about the US trying to limit China’s tech ambitions and it has been reported that Beijing is unwilling to negotiate on many of these issues, and instead would play for time.”
“The combination of these headwinds is likely to dampen business confidence and investment, profits, and consumer demand throughout the rest of this year. Together they could push the world to the brink of a global recession this year. This would be severe because central banks are running out of weapons to see off the threats.”