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The spread of coronavirus means that – for now – things will only get worse for the global economy

Markets are resilient to shocks, so growth will return – but not yet, writes Hamish McRae

Sunday 01 March 2020 17:02 GMT
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Army personnel spray disinfectant to prevent the spread of the coronavirus in front of a branch of the Shincheonji Church of Jesus in Daegu, South Korea
Army personnel spray disinfectant to prevent the spread of the coronavirus in front of a branch of the Shincheonji Church of Jesus in Daegu, South Korea

Wall Street is saying there will be a recession. That is the tough conclusion we should draw from the plunge last week. The Dow Jones index opened the week above 29,000, some 500 points off its all-time high of 29,551 on 12 February. By Friday’s close it was down to 25,409, having dipped below 25,000 in the day’s trading. This is huge; the biggest fall since the 2008 financial crisis.

Here in Washington, the speculation is that a recession, albeit one triggered by an external event such as the coronavirus, will scupper Donald Trump’s campaign for re-election. But while this may be a comforting thought for the Democrats, it is not at all comforting for the rest of us. The world’s second-largest economy, China, has clearly stalled and the impact of that is spreading across the globe. If the world’s largest, the US, goes into recession, so will much of the rest of the world.

It is not helpful to add to the speculation as to how grave the epidemic might be, so let’s assume that Wall Street is right and that there will be a sharp downturn. What then?

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