The OECD released their Interim Economic Assessment: Coronavirus: The World Economy at Risk
The OECD warns that the output contractions in China are being felt around the world, reflecting China’s key and increasing stake in global supply chains, travel and commodity markets.
Predictions for annual global growth are very uncertain. In a present best case scenario, the annual growth in 2020 will reach a maximum of 2.4%. This could be the case if the spread of the virus has reached a peak in China in the first quarter and has been broadly contained elsewhere The figure in the November 2019 Economic Outlook stood at 3%. On the other hand, in a scenario where contagion will become globally widespread, the economic consequences would be more detrimental. In such a case, the annual global growth might slow down to 1.5% in 2020, half of what the OECD predicted before the outbreak of the virus.
Governments need to strongly support public-health systems and workers to prevent further infection and contagion. On the macroeconomic side, governments should implement supportive policies. These should restore confidence and aid the recovery of demand once the effects of the virus are alleviated. In the case that the negative scenario materialises with growth levels diminishing for a longer period, governments need to act in a co-ordinated multilateral way. They need to ensure effective health policies, containment and mitigation measures, support for low-income economies, and a joint increase in fiscal spending. This would be the best way of restoring confidence and supporting incomes.
More information on the OECD Interim Economic Outlook/Assessment: click here
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