Investment Week speaks to Nathan Sheets, chief economist and head of global macroeconomic research at PGIM Fixed Income, about what could intensify a recession, his current global growth forecast and whether fiscal policy has impacted his economic outlook.
American economist Sheets, who has a PhD in economics from the Massachusetts Institute of Technology, previously served as the Under Secretary of the Treasury for International Affairs for four years, having been nominated by then-president Barack Obama in February 2013.
He also spent 18 years working at the US Federal Reserve, and was Citigroup's global head of international economics, before joining PGIM Fixed Income.
What is the probability of a global recession right now, and how does that compare with the probability at the start of the year? Do any regions stand out as more or less likely to hit a recession?
The effects of the coronavirus are hitting global growth hard. The supply-side of the economy is reeling as quarantines force many firms to suspend their operations.
Parts of the services sector that depend on face-to-face contact have been hit particularly hard.
On the demand-side, consumers are restricted to their homes and their ability to spend is reduced. Some of this lost expenditure is possibly being made up by increased internet purchases, or will occur after the lockdown ends, but consumer spending is taking a drubbing.
In conjunction with these disruptions, economic uncertainty has spiked - it is impossible to project with any confidence the severity or duration of the current episode.
This has stoked public anxieties, which in turn has further restrained spending and production, and weighed on the performance of financial markets.
The monetary and fiscal stimulus that is being put in place will buffer, but cannot reverse, these effects.
In this environment, we see a very high probability of global recession. Given the intensity of the challenges, no country or region will be immune.
Although many of the emerging-market economies have not yet felt the virus' wrath directly, they are hit by falling global demand and the retrenchment in investor risk appetite.
In addition, a number of the oil-exporting countries are feeling the sharp decline in oil prices.