World Bank Warns Recovery Will Take Longer Than 2008

The World Bank set a downbeat tone for the long-term outlook for economies over the weekend after warning the damage done by the coronavirus crisis will take even longer to repair than the Global Financial Crisis of 2008.

The World Bank’s new chief economist Carmen Reinhart said hopes of a rapid V-shaped rebound are off the mark, with any recovery likely to take more than five years on a per capita income basis. She told The Sunday Telegraph: “We are talking upwards of five years. Look, the damage being done is being done really to every sector.”

The economic data continues to be downbeat globally, with Japan (JPP) this morning reporting its worst ever GDP figures. The world’s third largest economy shrank 7.8% in Q2, annualised to a loss of 27.8% of GDP. It presents the worst drop since records began in 1980 and the third consecutive quarter of contraction for the troubled island nation. The country has recorded 19,000 new coronavirus cases in August, nearly a third of all the cases it has had so far, harming its prospects for a speedy recovery.

Meanwhile, politics continues to play a central role in the US amid election year. Leader of the House Nancy Pelosi has recalled congress early from its summer break over the US Postal Service crisis, with the national mail carrier in dire straits financially and the Trump administration undermining it ahead of the Presidential election on November 3rd. Democratic lawmakers have also demanded the USPS leaders testify at an emergency hearing regarding mail delays on 24 August. Trump said last week he was blocking $25 billion in emergency funding for the service and $3.6 billion proposed by the Democrats in extra funding for states to manage the election.

US markets tread water as data suggests recovery slowing

US markets finished the week broadly flat as data from the world’s largest economy, including unemployment and retail sales, suggested it was recovering but at a slower rate. The S&P 500 and Nasdaq both dipped marginally on Friday, while the Dow Jones gained a modest 0.1%. Just two stocks rose by more than 1% in the Dow on Friday – Walgreens Boots Alliance (WBA) led the index higher, up 2.2%, followed closely by Boeing (BA), up 1.9%. No stocks in the index lost more than 0.6%.

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