The coronavirus epidemic could damage global economic growth this year, but a sharp and rapid economic rebound could follow. The IMF head announced this on Sunday, 16th February 2020.
Speaking to the Global Women’s Forum in Dubai, the managing director of the International Monetary Fund, Kristaling Georgieva said: “There may be a cut that we still hope would be in the 0.1-0.2 percentage space.”
She said the full impact of the spreading disease that has already killed more than 1,600 people would depend on how quickly it was contained.
“I advise everybody not to jump to premature conclusions. There is still a great deal of uncertainty. We operate with scenarios, not yet with projections, ask me in 10 days.”
In its January update to the World Economic Outlook, the IMF lowered global economic growth forecast in 2020 by a 0.1 percentage point to 3.3%. This followed a 2.9% growth the previous year, the lowest in a decade.
Georgieva said it was “too early” to assess the full impact of the epidemic. She, however, acknowledged that it had already affected sectors such as tourism and transportation.
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“It is too early to say because we don’t yet quite know what is the nature of this virus. We don’t know how quickly China will be able to contain it. We don’t know whether it will spread to the rest of the world.”
If the disease is “contained rapidly, there can be a sharp drop and a very rapid rebound”, in what is known as the V-shaped impact, she said.
Compared to the impact of the Severe Acute Respiratory Syndrome (SARS) in 2002, she said China’s economy then made up just 8.0% of the global economy. Now, that figure is 19%.
She welcomed the trade agreement signed last month by the United States and China, the world’s first and second-largest economies.
“About China, it has been slowing down naturally, transiting from what we can call high speed to high-quality growth. And as a result of the reduction of trade tensions (after the agreement)… we actually have been predicting some improvement for 2020 in the projections for China.”
On the coronavirus, Georgieva said:
“They’re working very hard to contain the epidemic. They have brought $115 billion equivalent liquidity so they can perk up the economy.”
But the world should have more concern “about sluggish growth” impacted by uncertainty, said the IMF chief.
“We are now stuck with low productivity growth, low economic growth, low-interest rates and low inflation,” she told the Dubai forum. Also in attendance were US President Donald Trump’s daughter Ivanka and former British prime minister Theresa May.
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