Ratings agency S&P's Global has again lowered its forecasts and now expects global gross domestic product (GDP) to fall 2.4% this year, with the US and Eurozone expected to contract 5.2% and 7.3%, respectively.

Global growth is expected to rebound to 5.9% in 2021.

The revision to its macro forecasts follows the economic impact of Covid-19 being longer and more intense than thought, it says.

“While the very near term looks bleak, infection curves are flattening and the focus has turned to the recovery,” S&P global chief economist Paul Gruenwald comments.

He adds that the length and pace will, however, depend on the combination of health and economic policy, the response of people and firms, and the condition of the labour market and small and medium-sized enterprises (SMEs).

The balance of the risks still remains on the downside, considering that “much can go wrong” with the world’s baseline path on the health, economic and policy fronts.

Since the agency’s global macro report on March 30, S&P’s downside fears on the data have played out – services will be hit harder than manufacturing, discretionary consumer spending will be hit harder than spending on necessities, and smaller businesses will be impacted more than larger ones.

Moreover, lockdowns and physical distancing constraints now look to be in place for longer than expected, which S&P's says “will cause a much sharper decline in activity” than previously thought.

In light of these developments, the agency says it has lowered its 2020 growth outlook but has raised its 2021 forecasts to partially compensate.

The toll on global GDP is expected to be “far more severe”, with the contraction showing up in the first-quarter figure and worsening in the April to June period.

S&P's now forecasts a decline in real annualised GDP of 7.6% in the first three months of the year and 35% on an annualised basis in the second quarter, translating to a decline of 11.7% peak to trough.

“While the recovery will kick into gear during the second half of the year, it won’t be enough to offset overall economic losses caused by Covid-19,” S&P's says, and with businesses shuttered, it expects global unemployment to peak at 19% in May.

More specifically, emerging markets will struggle with external demand, the agency notes, adding that it now expects a “much deeper downturn” in the emerging markets owing to more stringent containment measures and their effects on domestic demand as the Covid-19 virus continues to spread.

The weakest quarter for most emerging markets in Europe, the Middle East and Africa and Latin America will likely be April through to June, according to the agency, which, thereafter, expects an uneven recovery dependent on policy responses.

Economies – such as Chile and South Africa – that have been quick to implement physical distancing polices, and have complemented those with robust economic stimulus, should see stronger recoveries, the agency notes.

Generally, countries – like Mexico – with delayed public health responses and limited stimulus programmes will see weaker recoveries. Brazil, on the other hand, is “somewhere in the middle”, while Russia has been hit by two shocks – falling oil prices and Covid-19.