First it was a V, then a U. Pessimists posited the possibility of a L, optimists landed on a W. Others got more creative still – like a gentle tick mark or the square-root symbol.

The only thing certain about the current global economic outlook is that it is uncertain - whether it be when the pandemic will be ‘over’, or the comparative impact of the immediate health crisis and subsequent economic dislocation.

But with uncertainty comes either paralysis or opportunity - getting a best ‘guess-timate’ of the timing and path to economic recovery is essential to making strategic decisions for the future.

Global economic outlook

The global economy is engulfed in a health crisis. We have seen governments around the world respond to the health and economic crisis in a swift, but largely uncoordinated manner which is unsurprising given there is a no ‘one size fits all’ policy response to this situation.

At one end of the policy response spectrum has been an approach that has sought to minimize the economic damage of COVID-19 by allowing the virus to go through the population (relatively) unchecked, with the consequence of such an approach being a poorer health outcome with stress on the health system. An alternative approach has been to adopt a government-engineered deliberate slowdown in the economy to manage the health risks. This approach has generally involved closing borders, introducing social distancing and quarantine measures, and prohibiting specific activities.

We are already starting to see how these different health strategies are flowing through to the real economy in various countries and territories. What remains uncertain though is how sharp the contraction in economic activity and employment will be in the short term, and conversely, when and how quickly economic activity and employment will rebound. 

In attempting to answer these questions it is also important to consider whether the macro structure of an economy is likely to be impacted; what components of GDP get hit hardest; what do the recovery profiles look like; and how does government policy impact the structure? All of these issues have been considered either explicitly or implicitly (PDF 50 KB) in the following analysis.

The central scenario incorporates an optimistic assumption that the worst of the health crisis that we have all been grappling with peaks for most countries and territories in 2020 Q2 and the world economy starts to recover from 2020 Q3 onwards; whereas the downside scenario allows for a more pessimistic outlook where the COVID-19 virus re-emerges in many economies in a second wave (or extended first wave) and various countries and territories are required to adopt partial lockdown measures again into 2020 Q3 and the recovery path is shallower than that assumed in the central case.

Key findings

  • As a consequence of the COVID-19 health crisis, and the subsequent global disruptions to aggregate supply and aggregate demand, world GDP is expected to fall sharply during the first half of 2020, with the KPMG Central and Downside scenarios showing real falls of 11% and 12% respectively between the December quarter 2019 and the June quarter 2020.
  • The recovery path modelled in this analysis shows world GDP is not expected to return to December 2019 levels until the end of the 2021Q2 under the Central scenario and 2021Q3 for the Downside scenario.
  • Different countries and territories are expected to experience divergent recovery paths, with the shape of that path for each location influenced by the interplay between their experience in containing and managing the spread of COVID-19 and the underlying socio-economic characteristics of each country or territory.
  • The analysis reveals trade exposed countries may take proportionally longer to recover in the scenario where the C19 pandemic becomes drawn out compared to less trade exposed states. Simply, the longer the pandemic continues, the more damaging it becomes to world trade.
Real GDP, World 2019 Q4 = 100
GDP growth (%y/y) 2018 2019 2020* 2021* 2022* 2023*
Central 3.3 2.7 -4.1 6.6 4.3 3.9
Downside 3.3 2.7 -7.9 4.4 3.0 2.0


Why do we think differently to the other global forecasters? Our economic analysis integrates Eurasia Group’s predictive political intelligence to help guide our thinking on how the health crisis is likely to be managed going forward – that is, how the health vs. economics political equation may be answered in major markets, and how long lockdown restrictions will persist.

The future may be uncertain, but integrating these type of plausible, in-depth political and economic scenarios into your investment frameworks, financial models, business planning and risk management processes can help you identify and prioritize the critical risks - and opportunities - facing your business. Please feel free to get in touch for KPMG professionals analysis on your specific market, including GDP growth, inflation, current account and unemployment forecasts.

With thanks to Dr. Brendan Rynne (Chief Economist, KPMG Australia) and his team for undertaking the analysis, as well as Eurasia Group and Chief Economists from across the network of member firms for their contribution. More information on our modelling tool, assumptions and variables (PDF 50 KB) are available here.

NIESR (April) refers to latest global macroeconomic forecasts prepared by the National Institute of Economic and Social Research (NIESR) which were released in late May 2020 and which incorporate expectations of how C19 will be impacting economic activity on a country-by-country basis.

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today

Sign up today

Connect with us


Want to do business with KPMG?


loading image Request for proposal