The OECD sounded the alarm about coronavirus on Monday, warning that it could halve global economic growth this year from its previous forecast. The Paris-based group lowered its central growth forecast from 2.9 per cent to 2-4 per cent, but said a “longer lasting and more intensive coronavirus outbreak” could slash growth to 1.5 per cent in 2020. It defined a more intensive outbreak as one that spread “widely” throughout the Asia-Pacific region, Europe and North America and issued its warning as new cases were reported around the world and the death toll continued to climb.
The OECD, a group of mostly rich countries, said the effect of widespread factory and business closures in China alone would cut 0.5 percentage points from global growth as it reduced its main forecast to 2-4 percent. Its warning came as heavy hints of central bank support for the global economy jolted stock markets higher on Monday following a dire week in which global equities lost one-tenth of their value.
The Bank of Japan said it would “provide ample liquidity and ensure stability in financial markets” while the Bank of England said it was working with international partners “to ensure all necessary steps are taken to protect financial and monetary stability”. Two of Europe’s most senior central bankers have said they were closely monitoring the economic impact of the coronavirus and stood ready to act if needed.
Luis de Guindos, vice-chairman of the European Central Bank, said the ECB remained “vigilant and will closely monitor all incoming data” while underlining its standard guidance that it “stands ready to adjust all its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner”. Frarn;ois Villeroy de Galhau, governor of the Banque de France, said in a radio interview on Monday: “We are vigilant, we are mobilised, but we will remain calm and proportionate in the responses that must be provided.”
The US Federal Reserve said on Friday that it would “act as appropriate” to support growth, using a phrase it has previously deployed to signal a willingness to consider cutting interest rates.