According to the Organization for Economic Cooperation and Development, the coronavirus is plunging the world economy into its worst downturn since the global financial crisis, with a warning that growth could be cut in half if the outbreak continues to spread.
The OECD has predicted GDP to grow by just 1.5% in 2020 if the coronavirus spreads widely throughout Asia, Europe, and North America. This is half the 2.9% growth rate the group projected for 2020 before the outbreak and severe enough to push Japan and Europe into recession.
Policymakers across the globe need to act as fast as possible to prevent such a scenario, the OECD said. The organization has also called for a coordinated global response to contain the outbreak, with a recommendation for governments to increase spending and central banks implement policies to help cushion the blow from the virus.
Even in the best-case scenario, which will be the peak of the epidemic in China and only mild outbreaks in other countries, the organization predicts that the global economy would grow only 2.4%. This somewhat optimistic forecast still falls short of the 3% recorded last year and will be the weakest level of growth since the global financial crisis in 2009.
“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions. Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected,” said OECD chief economist Laurence Boone.
Many of the biggest companies in the world have started to issue profit and sales warnings in recent weeks, which is a reflection of changes to consumer behavior that are causing a disruption even in markets with relatively few identified cases. Some businesses are also experiencing troubles keeping their factories open due to travel restrictions and supply chain problems.
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