"But we could very easily see an outright decline in global GDP this year if more pervasive lockdown measures have to be rolled out across all the G7 economies," added Coulton.
The shock to the Chinese economy
has been very severe. GDP is likely to fall by over 5 per cent in Q1 20 and to be down by 1 per cent year-on-year. Falling GDP in China is virtually unprecedented and, in the near term at least, these numbers look worse than most previous hypothetical 'hard-landing' scenarios.
The good news is that the daily number of new COVID-19 cases in China has fallen very sharply, which should pave the way for a marked economic recovery in Q2 20. High-frequency indicators already point to this starting in March.
Nevertheless, the delayed impact of supply-chain disruptions and lower Chinese demand on the rest of the world will continue to be felt profoundly for some time, particularly in the rest of Asia and the eurozone, said the Fitch outlook.
Moreover, the rapid spread of the virus outside China has prompted sharp declines in travel and tourism, and the cancellation of business and leisure events worldwide as 'social distancing' takes hold.
And some other large advanced countries -- most notably Italy, Spain and France -- have engaged in aggressive official lockdown responses similar to those seen in China. These countries are likely to see very sizeable outright declines in GDP in the coming months.
"The interruptions to economic activity seen in China are on a scale and speed rarely seen other than during periods of military conflict, natural disasters or financial crises."
While there is huge uncertainty, said the outlook report, quarterly declines in GDP of 3 to 5 per cent in a full lockdown scenario look feasible. The risk is that we shortly see these abrupt interruptions happening simultaneously across all major economies as the global pandemic spreads.
This reflects the likelihood that travel, tourism, and business and leisure events will be disrupted for months. There is a collapse in the equity market, lower business and consumer confidence and other disruptions to US economic activity that are emerging as authorities seek to contain the virus.
"We expect global growth to fall to 1.3 per cent in 2020 from 2.7 per cent in 2019, which will be weaker than global downturns in the early 1990s and in 2001."
Coulton said rapid and large-scale macro policy responses are all about damage limitation in the near-term, but policy easing should help GDP normalise and recover quickly in the second half of the year on the assumption that the health crisis subsides.
"However the uncertainties here are huge and we are really only at the beginning of the process of trying to understand the full impact of the crisis on the world economy," he said.