World now in a ‘deep recession’, say Goldman Sachs analysts

World now in a ‘deep recession’ with global economy set to shrink by 1% this year, say Goldman Sachs analysts

Coronavirus has already pushed the world economy into a ‘deep recession’, according to Goldman Sachs. 

The slowdown caused by the Covid-19 pandemic will cause the global economy to shrink by 1 per cent this year, analysts at the investment bank said. 

That is weaker than the year following the global financial crisis just over a decade ago. 

Goldman’s warning came as Lord King, former governor of the Bank of England, said the uncertainty caused by coronavirus would be even worse than the 2008 crash. 

The slowdown caused by the Covid-19 pandemic will cause the global economy to shrink by 1% this year, analysts at Goldman Sachs said

And in a startlingly bleak forecast, James Bullard, president of the St Louis Federal Reserve, said the US economy would shrink by 50 per cent in the second quarter of the year as unemployment jumped to 30 per cent. 

King, 71, said: ‘I think this is much more serious and much more difficult to cope with. 

‘In the financial crisis, we were dealing with a relatively small number of financial institutions, we knew broadly what we had to do. 

‘In this case, the situation is extremely uncertain.’ 

He added that the Government should commit to borrowing ‘whatever is necessary’ to allow businesses and the self-employed to survive until the pandemic passes. 

The Government has already committed to pay 80 per cent of people’s wages if they are forced to stop working, up to a maximum of £2,500 per month, which Goldman’s analysts believe will cost £40billion. 

By the 2024-25 financial year, Goldman thinks public sector borrowing will have grown to 4 per cent of Britain’s economy, compared to 2.25 per cent had the virus not hit. 

Analysts at Swiss bank UBS have predicted that Europe’s economy will shrink by 4.5 per cent this year, similar to 2008.