The Gas Exporting Countries Forum (GECF) has generated its outlook on the global and regional economic impact of the current spread of COVID-19, positing a mid-term view that foresees a 2.7% increase in gross domestic product (GDP).
Similar to its impact on crude oil markets, the spread of COVID-19 is set to alter the landscape of global gas markets, with China’s natural gas demand slashed by 10 billion cubic meters and natural gas prices and futures trading plunging to their lowest in years.
Representing 12 of the world’s leading natural gas producers, the GECF serves to foster collaboration among member countries and promote the coordination of global energy developments to contribute to sustainable development and global energy security.
Together, GECF members control over 70% of the world’s natural gas reserves, five of which are located on the African continent (Algeria, Libya, Nigeria, Equatorial Guinea and Egypt).
The GECF’s official forecast was developed utilizing the reference point of economic growth generated by the latest World Economic Outlook, which anticipated a 3.3% gross domestic product (GDP) growth in 2020. Based on this figure, the GECF has advanced three scenarios that measure the economic impact of the COVID-19 crisis, forecasting global GDP growth as well as growth in selected countries and regions.
“It is important to highlight that under all the above mentioned scenarios, aftershocks responses need to be considered as they could curb the stabilization of the economic growth around the foreseen levels of today’s estimations, and thus we can expect global economic growth much lower than the figures indicated,” said H.E. Yury Senturyin, Secretary General of the GECF, in an official statement.
“Based on our analysis, which is inspired from the current worrisome situation, no economy in the world will be immune from Coronavirus and the impacts will be heavily felt worldwide if no efficient global measures are found and agreed upon.”
In the short-lived model, in which COVID-19 is contained in the second quarter of 2020 and represents a 3-5 month crisis, the GECF anticipates a global GDP growth of 3.1%, a -0.2% departure from the World Economic Outlook (WEO) forecast. In addition to a limited duration of disruption, this forecast anticipates the economic impact being mitigated through strong fiscal and monetary stimulus, and the impending removal of quarantine restrictions based on the recommendation of medical experts.
In the mid-lived model, in which COVID-19 is contained in the third quarter of 2020 and represents a 6-8 month crisis, the GECF anticipates a global GDP growth of 2.7%, a -0.6% decrease from the WEO. Representing the organization’s baseline prediction, this forecast anticipates that the world economy will undergo a drastic deceleration as it seeks to stabilize itself.
In the long-lived model, in which COVID-19 is not contained by the end of the year, the GECF anticipates a global GDP growth of 2%, which would reflect a -1.3% drop in growth compared to the WEO. In this model, the impact of the crisis is severe due to prolonged disruption in global supply chains and reduced demand. In this scenario, both global trade and global investment will contract, and commodity prices will continue to plummet.
Comparison to Other Forecasts
In addition to the GECF, several international organizations and economic institutions have shared their economic forecasts, which vary in degree of severity, but overall conclude on a deceleration of the world’s economy.
In February, the International Monetary Fund (IMF) announced that China’s economic growth in 2020 would be reduced by 0.4%, from 6% to 5.6%. Global economic growth was estimated to decrease by 0.1% from 3.3%. However, the IMF recently modified the forecast to include that in any given scenario, global growth in 2020 will decline to less than 2.9%, with the degree of economic fallout depending on the duration of the crisis.
According to a survey conducted by FocusEconomics, the COVID-19 outbreak will result in a contraction of global growth by 0.2% in 2020, compared to forecasts prior to the outbreak. China’s GDP growth in 2020 is projected to decline by 0.5 – 0.8%.
Oxford Economics has revised its forecast of global economic growth in 2020 from 2.5% to 2.3%, down from a 2.6% forecast in 2019. China’s economy is expected to grow by 5.4% in 2020, down from 0.6% as compared with the January 2020 forecast.
Lastly, the International Air Transport Associated estimated a $30 billion loss in revenue for airline and tourism companies due to the COVID-19 outbreak, and foresees a slowdown of the industry from 4.8% growth to a 8.2% contraction within the sector.