Worse than 2009? Really?

Many investors and financial consumers remember the 2008-9 recession with some degree of horror, as a time we’re not (to put it mildly) anxious to repeat. Is it possible that the current situation is worse?

Some very interesting research posted on the GZERO website (see chart) suggests that it is. The website’s researchers took statistics from the International Monetary Fund and the World Bank regarding the Great Recession. They then calculated the difference between the decline in gross domestic product in 2009 vs. the GDP growth in 2010 for 13 countries. Finally, they compared the difference—the “spread” between decline and recovery— with the projected economic declines in 2020 vs. the projected recoveries in 2021. These numbers are, we should repeat, projections, but they are based on the historically unprecedented decline in worker productivity and unemployment insurance applications due to the global COVID-19 pandemic, and on country-by-country expectations of recovery once people finally get back to work. What did they find? The U.S. GDP declined 2.5% in 2009, which represents a steep recession and a great deal of economic pain. The projected decline in 2020 is more than double that figure: 5.9%. The same pattern, with some differences in magnitude, holds true for other countries. Brazil, for example, experienced a relatively mild 0.1% GDP decline in 2009, compared with a projected 5.3% downturn this year. Canada’s GDP fell 2.9% in 2009; the projected decline this year: 6.2%. The spread between decline and recovery is also generally greater across most of the countries in the study. The exceptions are interesting. Russia’s economy declined 7.8% in 2009, vs. a projected 5.5% decline in 2020. It mustered a strong 4.5% recovery in 2010, but the IMF projects just a 3.5% GDP gain in 2021. China is also an outlier. If you can believe its numbers, China experienced 9.4% GDP growth in 2009 while everybody else was tumbling into recession, and (with the same caveat) China’s GDP growth rose to 10.6% a year later. This time around, the projected numbers are a gain of just 1.2% this year, followed by a strong 9.2% growth rate in 2021. The point here is that we may be experiencing more economic pain this year—by a considerable margin—than Americans or global citizens experienced in the trough of the Great Recession. Why isn’t the stock market reflecting this? Your guess is as good as anybody’s. Source: