A SHORT, SHARP global recession, driven by the coronavirus is a real risk according to the CEO of one of the world’s largest financial advisory organisations. He is urging investors "to take steps now to build and protect their wealth".
The warning from Nigel Green, the chief executive and founder of deVere Group, comes as confirmed cases rise and governments and central banks around the world are taking increasingly aggressive measures to try and combat the economic impact of the outbreak.
Among the steps being taken on Tuesday, the US Federal Reserve announced that it would slash interest rates by half a percentage point. Meanwhile, the Bank of England is drafting an action plan to deliver a “powerful and timely” response to the coronavirus outbreak, and Australia signals it may resort to Quantitative Easing.
“The outbreak is developing and evolving quickly and no-one accurately can predict what will be the economic fallout," Mr Green said.
“However, I believe that based on what we currently know, the risk of a coronavirus-driven short, sharp global recession this year is significantly growing.
“The epidemic has already dented anaemic global economic growth this year and it can be expected to slow further, then contract, as the fear of the virus takes hold.”
“The outbreak has already sent the stock market into bouts of volatility not seen since the 2008 financial crisis, severely disrupted global supply chains, shuttered factories, grounded flights, closed attractions and cancelled major events. Entire powerhouse cities in Asia and Europe are nearly shut down.
"Multinational companies have warned that coronavirus will severely hit profits. Workers are being evacuated and forced to work from home and to avoid travelling," Mr Green said.
“We can see both supply and consumer demand are already being impacted in key sectors, such as travel and tourism, hospitality, manufacturing and retail, and it is going to extend to others.
“This scenario is then likely to feed on itself: a lack of consumer confidence and spending, lack of business investment, more job cuts, which means even less spending and demand, which leads to further job cuts.
“Unfortunately, companies already on the edge are likely to fold as we have seen this week.
“Against this backdrop, we should prepare for a short-term but severe global recession," Mr Green said.
“However, the world economy is likely to bounce back strongly. We could even see revived global growth as economies rebuild and adapt; and especially so if central banks and governments step in to actively kick-start growth.
“The short-term economic impact of coronavirus is likely to affect capital markets, which in turn affects investor returns.
“Coronavirus has shifted the landscape. Investors are urged to review their portfolios to ensure that they are still on track to create, build and generate wealth.”
The deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and its high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12 billion under advisement.