S&P Report on Coronavirus: Global Recession is Here

S&P Global's chief economist says the data emerging from China shows that its economy was "hit far harder than projected."

S&P Global Ratings forecasts a global recession this year due to the ongoing spread of coronavirus disease 2019 (COVID-19), according to an article published Tuesday morning.

The ratings agency projects estimated global GDP growth of 1% to 1.5%, but notes "risks remaining firmly on the downside."

Additionally, Paul Gruenwald, S&P Global's chief economist, says the data emerging from China following the spread of COVID-19 earlier this year shows that its economy was "hit far harder than projected," while noting that a stabilization plan has been put into place.

"Europe and the U.S. are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year," Gruenwald said. 

The article was released the same morning that Morgan Stanley and Goldman Sachs Group Inc. declared that the coronavirus crisis has spurred a global recession.

The article does not represent a ratings action, S&P stated.

The COVID-19 outbreak has created a significant impact worldwide, causing the World Health Organization to declare the virus a pandemic on March 11.

While Asian countries, which were the first to be affected by the spread of the virus, have begun to stabilize in recent weeks, Europe and the United States have seen a significant rise in confirmed cases and instituted restrictions on person-to-person contact in response.

These social distancing actions will "affect economic activity," S&P stated, and countries are likely to lift these restrictions more slowly that first presumed in order to contain the spread of the virus.

Additionally, S&P projects that "financial conditions continue to tighten for most market participants" and that the eventual recovery effort will depend on how "much output can be replaced."