World Economic Outlook – IMF report: A Crisis Like No Other, An Uncertain Recovery
On Saturday, the world’s largest economies called for consolidated efforts to counter the threat of the spread of the coronavirus epidemic, which the IMF predicts will slow the growth of the Chinese economy this year to 5.6% and reduce global economic growth by 0.1%..
Finance ministers and central banks of the world’s 20 largest economies (G20) discussed major economic issues over the weekend in Riyadh, with a focus on growth prospects and new tax rules for global digital companies.
IMF Head Kristalina Georgieva noted that the Chinese authorities are working to mitigate the negative impact on the economy through crisis measures, liquidity, fiscal measures and financial support..
«Our current baseline scenario takes into account the implementation of all stated policy strategies and that the Chinese economy will return to normal in the second quarter. As a result, the impact on the global economy will be relatively minor and short-lived.», – said Kristalina Georgieva.
«In this scenario, by 2020, growth for China will be 5.6%. This is 0.4 percentage points lower than the January World Economic Outlook data. Global growth will be about 0.1 percentage point lower».
«But we are also looking at worse-case scenarios in which the spread of the virus continues longer and on a more global scale, and the impact of the growth will be more protracted.», – she added.
In January, the IMF forecast global economic growth from 2.9 percent last year to 3.3 percent this year. Since then, COVID-19, deemed a global health emergency by the World Health Organization, has disrupted manufacturing activities in China.
China reported a sharp drop in new deaths and diseases on Saturday, but the World Health Organization (WHO) warned it was too early to predict the epidemic and said it was concerned about the number of new infections in other countries with no clear link to China. e.g. as a result of travel or contact with a confirmed case.
The impact of the coronavirus epidemic is on the rise given that Chinese factories are still running at about half their capacity and many workers are staying at home. The partial shutdown of production in the world’s second largest economy has a negative impact on all global processes, weakening trade, disrupting supply chains, reducing tourist flows and fanning investor uncertainty..
«The global economy is facing a clear slowdown, and this slowdown could be exacerbated by the so-called coronavirus», – French Finance Minister Bruno Le Maire said in Riyadh. «The question remains whether it will be a V-shape with a fast global economic recovery, or whether it will lead to an L-shape with a permanent slowdown in global growth.». He said a V-shaped scenario is more likely.
«The big twenty» expects more modest global growth this year and next, but noted negative risks to this outlook as well, due to «… geopolitical and trade tensions, political uncertainty and macroeconomic risk associated with environmental sustainability».
Georgieva also said at the summit that global cooperation is essential to contain the spread of the virus and its economic impact, especially if the epidemic has proven to be more resilient and widespread..
She said the potential risk to fragile and underdeveloped health systems needs to be recognized, adding that the IMF stands ready to provide debt relief grants to its poorest and most vulnerable members..