It is expected to take until 2023 before global trade returns to the level before the coronavirus crisis. That is what the economists at Euler Hermes write in a new macro-economic study. Belgium is among the worst cases in Europe: countries like Germany, the Netherlands and Sweden will recover faster.
The global economy has suffered a severe blow: the experts at Euler Hermes expect a contraction of at least 4.7% in 2020. Global trade will fall by 15%. The energy sector has been particularly hard hit. The metal industry, the transport sector and car manufacturers also shared in the setbacks. International trade is expected to recover from the crisis at the earliest in 2023.
320,000 jobs at risk; 13,000 insolvencies
The outlook is far from rosy in Belgium. The economists at Euler Hermes foresee a negative GDP growth of -10% in 2020. The consequences for the Belgian economy and the labour market are disastrous: more than 320,000 jobs are at risk. It is primarily employees in the retail, construction, transport, restaurants and hospitality, industry and cultural and event sectors who need to worry about their jobs. At the end of 2021, the unemployment rate is expected to rise to 8.5%. Before COVID-19, that figure was just 5.4%. The coronavirus risks leading to an economic bloodbath: our experts expect 13,000 insolvencies in 2020 in Belgium. In 2021, a further 13,400 businesses are expected to fail. This represents an unprecedented increase of +26% as compared to 2019.
Belgian recovery is lagging behind
A lasting economic recovery will likely not come before 2023. Our economists expect that only then will the Belgian economy return to pre-crisis levels. In this regard, our country is lagging behind: Germany, the Netherlands and Sweden are picking up faster. The economy of the Eurozone is supposed to attain pre-COVID-19 figures by the end of 2022.
Three times less direct support than in Germany
Economists have set out the factors that contribute to a rapid recovery. For example, the length and severity of the lockdown plays an important role. The scale and composition of fiscal stimuli are also crucial. There are various reasons why Belgium is recovering more slowly than, say, Germany. Our country handed out a total of EUR50 billion in budgetary support, the equivalent of 11% of GDP. A sum that is relatively modest in comparison with other European countries. It is worth noting that Belgium has spent only 6% of GDP on direct support measures, such as tax relief and temporary unemployment benefits. That is 50% less than in France and over three times less than in Germany. The distinctive nature of the Belgian economy is also causing problems. Traditionally, Belgium has a large service sector, which is recovering only very gradually.
Re-election of Trump uncertain
The coronavirus is also putting at risk the re-election of the American president, Donald Trump. According to the economists at Euler Hermes, this pandemic is a true turning point for the outcome of the upcoming presidential election. Euler Hermes estimates the chances of the President’s party being re-elected based on an analysis of different macro-economic variables. Donald Trump has seen the chances of a second term fall from 45% to barely 22.5%. That a sitting president has so little chance of being re-elected is exceptional in recent American political history. The likelihood of the American president’s party being re-elected
Social unrest flairs up
Economists at Euler Hermes also fear growing social unrest worldwide. Poor management of COVID-19, in combination with rising prices, growing poverty and a vulnerable health care sector can bring existing social tensions to a head. Countries in Latin and South America are particularly at risk. Closer to home, there are threats of conflict in Turkey and in Bosnia-Herzegovina . Economists predict increasing tensions in Belgium, Luxembourg, the United Kingdom, Sweden, Iceland, Norway, New Zealand and the United States. To be perfectly clear: the risk of unrest in the latter countries is quite limited, but social tensions are certainly on the rise.
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