UN estimates global decline, slow recovery for oil sector in 2020: chief economist

NEW YORK, United States — The United Nations forecasts the global economy to shrink by 3.2 percent in 2020 mainly due to the COVID-19 pandemic, the UN’s chief economist has told Rudaw. 

Elliott Harris, Assistant Secretary-General for Economic Development spoke to Rudaw's Majeed Gly about his predictions for the global economy in wake of the pandemic.

Although the estimated economic decline may not be as severe as the 1929 financial crisis, the global economy is expected to shrink more than 3 percent, a sharp decline from an estimated 2 to 2.5 percent growth predicted at the beginning of the year.

"We have a projection now of a global decline of 3.2% this year. And as far as things go, that is not the worse decline in global economy that we have registered. In the great depression back in 1929 it was much worse,” Harris said, adding that the current estimations assume economic restrictions will be lifted in the second quarter. 

However, the impact of coronavirus lockdown measures has created unprecedented change to economic activity. 

“Much of the economy, many sectors have been literally shut down. This has never happened before in recorded history,” Harris added. 

According to the assistant secretary-general, the economic impact is mainly manifesting through changes to supply and demand chains – resulting in “one of the most aggressive recessions we’ve seen outside of wartime.” 

The decline in economic growth has a direct impact on oil bringing down the price of oil to single digits, and even negative figures, in US markets. 

The UN is not optimistic about recovery in oil markets anytime soon. 

 "We are cautiously estimating that there will be a bit of a lag before oil prices could actually start to recover even after the economic recovery picks up," Harris said in response to a question about the future of oil prices. 

The US alone recently added nearly 75 million barrels into its strategic oil reserves. Other major producers such Russia and Saudi Arabia have increased oil production in the past couple of months only to be faced by a damping global demand. 

"Stockpiles would have to be brought back down before the normal condition of supply and demand can be reestablished" Harris added.