World Economy

A V-shaped economic recovery is still 'perfectly possible,' Jim O'Neill says

Key Points
  • Speaking to CNBC's "Street Signs" on Friday, the former Goldman Sachs chief economist said it was important to remember that back in January it was "mass consensus belief" we would see a "V-shaped" stock market performance and a "V-shaped" economic recovery.
  • "And, of course, in the past two months, virtually no-one has believed that that is possible even though it has been so severe," O'Neill said.
  • Nonetheless, he suggested this kind of economic recovery is "perfectly possible."
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Pandemic destroying belief that health and finance are separate issues: Jim O'Neill

Chatham House Chair Jim O'Neill has argued a so-called "V-shaped" economic recovery is "perfectly possible," saying early indicators make it "pretty clear" that many economies are in a comfortably better position than some had feared.

His comments come as global stocks continue to rally, despite the coronavirus pandemic and corresponding confinement measures leading to an unprecedented economic shock.

It seems to suggest investors are tentatively pricing in an economic recovery, with many countries taking steps to gradually ease some lockdown restrictions.

Speaking to CNBC's "Street Signs" on Friday, the former Goldman Sachs chief economist said it was important to remember that back in January it was "mass consensus belief" we would see a "V-shaped" stock market performance and a "V-shaped" economic recovery.

A V-shaped recovery refers to a sharp decline in economic activity which is then matched by an abrupt rebound.

"And, of course, in the past two months, virtually no-one has believed that that is possible even though it has been so severe," O'Neill said. Nonetheless, he suggested this kind of economic recovery is "perfectly possible."

O'Neill went onto say that investors monitoring high-frequency indicators of economic activity will understand that "it is pretty clear that things are way off the worst in the United States and in a number of places around the continent."

In comparison, the upcoming publication of U.S. nonfarm payrolls was unlikely to tell investors anything they did not already understand about the trend of U.S. weekly job claims, O'Neill continued.

U.S. nonfarm payrolls are expected to show a further deterioration of the country's job market on Friday, with some economists anticipating the unemployment rate to near 20% as millions more lose their jobs.

"What is more important is vaccine development, if that turns out to be actually not likely then that will be a massive source of disappointment, as would be a significant pick-up of infections in the U.S. and Europe," Chatham House's O'Neill said.

'Not impossible' to have a Covid-19 vaccine available by September

To date, more than 6.6 million people have contracted the coronavirus worldwide, with 391,588 deaths, according to data compiled by Johns Hopkins University.

In speaking to CNBC's "Street Signs" via video call on Friday, O'Neill specifically referenced the latest developments from AstraZeneca, with the pharmaceutical company recently going public with plans to produce 2 billion does of a Covid-19 vaccine over the coming months.

AstraZeneca's building in Luton, Britain.
Tim Ireland | Xinhua News Agency | Getty Images

AstraZeneca CEO Pascal Soirot said on a call with reporters on Thursday that the company plans to start distributing the vaccine to the U.S. and U.K. in September or October, with the balance of deliveries likely to be made by early 2021.

"It adds to my belief that it is not impossible that a usable vaccine could be available for a significant part of the world by this September. Obviously, they have got to get through some important tests in the coming weeks, but it sounds to me that it is quite possible and it is a fantastic development," O'Neill said.