Virus Pushes the Global Economy Closer to a Contraction
Bloomberg News
By William Horobin
March 2, 2020, 5:00 AM EST Updated on March 2, 2020, 7:26 AM EST
OECD slashes 2020 economic forecast to 2.4% from 2.9%
Sees need for coordinated action if situation doesn’t improve
Global economic growth will sink to levels not seen in over a decade as the coronavirus outbreak hammers demand and supply, challenging central banks and governments to respond to a fast-changing situation, according to the OECD. As central banks around the world try to calm a market panic, the Paris-based group also warned of possible global contraction this quarter. It cut its full-year growth to just 2.4% from 2.9%, which would be the weakest since 2009.
The forecast assumes the China-centered epidemic peaks this quarter and outbreaks in other areas “remain mild and contained.” If it proves longer lasting and spreads through Asia, Europe and the U.S., the economic impact would be severe. Global growth in that case would be just 1.5%, with the possibility of recessions in economies including Japan and the euro area.
...There are some measures governments can and must take immediately, the OECD said. Those could include fiscal support for health services, flexible work regimes with guarantees on take-home pay, providing liquidity to the financial sector, targeted support for affected industries like tourism, and looser state aid and fiscal rules.
Beyond Coronavirus, other significant risks continue to weigh on the global economic outlook. Those include trade and investment tensions that “remain high and could spread further,” and uncertainty over Brexit. The recent slump on financial markets also adds to vulnerabilities from high debt levels and deteriorating credit quality, the OECD said.
https://www.bloomberg.com/news/articles/2020-03-02/virus-pushes-global-economy-toward-first-contraction-since-2009?srnd=premium
