Coronavirus: Global Growth ‘Could Halve’ If Outbreak Intensifies
The
influential think tank has forecast growth of just 2.4% in 2020, down from 2.9%
in November.
But
it said a longer "more intensive" outbreak could halve growth to
1.5%.
It
came after the Bank of England vowed to help stabilise markets, which suffered
steep losses last week.
Coronavirus
is already forcing businesses to suspend operations in China and elsewhere as
officials try to contain its spread.
The
OECD forecast the global economy could recover to 3.3% growth in 2021, assuming
the epidemic peaked in China in the first quarter of this year and other
outbreaks proved mild and contained.
But
it said the picture would be much worse if the virus spread throughout Asia,
Europe and North America.
"The main
message from this downside scenario is that it would put many countries into a
recession, which is why we are urging measures to be taken in the affected
areas as quickly as possible," said Laurence Boone, the OECD's chief
economist.
Last
week saw major stock markets suffer their worst weekly performance since the
2008 financial crisis, with $1.5 trillion being wiped off the value of global
shares. Investors now hope central banks around the world will work in unison
to support financial markets as the deadly virus spreads.
On Monday, the Bank
of England said it continued to monitor developments and was assessing its
potential impact on the global and UK economies and financial systems.
"The
Bank is working closely with HM Treasury and the FCA (Financial Conduct
Authority) - as well as our international partners - to ensure all necessary
steps are taken to protect financial and monetary stability," a spokesman
said.
Japan's
central bank and the US Federal Reserve have also said they are prepared to intervene
to stop more big falls on global stock markets.
Buoyed
by the news, US stocks opened higher on Monday, with the Dow Jones Industrial
Average and S&P 500 indexes both up 0.7%.
London's
FTSE 100 index soared almost 3% in early trading, before falling back. Asian
markets closed higher, with China's Shanghai Composite index gaining 3.2% and
Japan's benchmark index, the Nikkei 225, ending the day 1% higher.
On Monday, the
privately-run Caixin/Markit Manufacturing Purchasing Managers' Index showed the
fastest rate of contraction in China's factory activity since the survey was
launched in 2004. That followed the release on Saturday of equally weak
official numbers.
Both
sets of data come after employers across the country were ordered to remain
closed after the annual Chinese New Year holiday as part of attempts by
authorities to stem the spread of the virus.
The
falls, which were even worse than the slump seen during the 2008 global
financial crisis, highlighted the outbreak's huge impact on the world's second-largest
economy.
There are limits to
what traditional monetary policy can actually achieve if the coronavirus
outbreak continues to spread.
If supply chains are
disrupted, and factories have to shut down, interest rate cuts are unlikely to
help very much. Likewise, if people don't want to go to the shops, eat in
restaurants, travel on planes or stay in hotels, cheap credit isn't going to
make a lot of difference. And in many countries, interest rates are in any case
already low.
But the prospect of a
rate cut does at least provide a psychological prop - and reduces the risk of
the falls on the markets turning into a rout.
The next step may be
to look at ways of encouraging commercial banks to provide targeted support -
for companies that are struggling with repayments on loans because their
business has been affected by the outbreak, for example.
That may be the kind
of life-support that's really needed to keep firms operating until the worst of
the crisis is over.
The OECD said
governments would have to step in if the virus worsened, providing extra
support for their health systems and emergency loans for hard hit industries.
"A G20
coordinated health, fiscal and monetary policy response would not only send a
strong confidence message but also multiply the effect of national
actions," Mr Boone added.
Over the weekend
senior officials in President Donald Trump's administration also tried to
soothe concerns about the impact of the outbreak, highlighting the US economy's
underlying strength.
US Vice-President Mike
Pence, who is leading the administration's response to the coronavirus, said
that the stock market "will come back", adding that "the
fundamentals of this economy are strong".
FROM .bbc.com/news/business
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