International Monetary Fund Managing Director Kristalina Georgieva has presented two likely scenarios for global economic growth amidst the spreading coronavirus, known the medical acronym of COVID-19.
In her statement at the G20 Finance Ministers and Central Bank Governors Meeting in Riyadh on 22 February, Georgieva urged the world’s top economies to present a coordinated response to the epidemic, which has been predicted by the IMF to reduce China’s growth in 2020 to 5.6 percent, and trim 0.1 percent off global growth estimates.
“In our current baseline scenario, announced policies are implemented and China’s economy would return to normal in the second quarter. As a result, the impact on the world economy would be relatively minor and short-lived,” said Georgieva.
The IMF Managing Director continued:
“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted.”
Georgieva applauded the efforts of the Chinese authorities to alleviate the negative economic impact of the epidemic with appropriate crisis measures, such as liquidity provision, fiscal measures and financial support.
“While the impact of the epidemic continues to unfold, the WHO’s assessment is that with strong and coordinated measures, the spread of the virus in China and globally can yet be contained and the human tragedy arrested,” she said.
The coronavirus outbreak had kept senior Chinese officials away from the event in Riyadh, with the country represented at the G20 meeting by its ambassador to Saudi Arabia.
China, whose outlook is 0.4 per cent lower now than it was last month, has insisted it could still meet its economic growth target for 2020.
While welcoming news that China had reported a drop in new deaths and cases on Saturday, the World Health Organisation (WHO) nonetheless cautioned against hasty predictions about the epidemic, expressing concerns about the number of new infections in other countries.
Speaking at the meeting, Japan’s finance minister Taro Aso told reporters he had warned the G20 that the world economy would suffer a serious impact in case of a dire scenario, where the virus spreads further.
“But it’s hard to grasp what is happening as there’s relatively little information. I can say today’s participants called for the need to coordinate (in responding to the virus impact),” said Taro Aso.
Amidst the general call for a coordinated response to the impact of the coronavirus on the world economy, Reuters cited a source as saying the G20 countries had not yet scheduled any separate committee or meetings to deal with the matter.
Investors Embrace Safe-Haven Greenback
Amidst concerns over the global coronavirus outbreak, the US dollar index reached a three-year high.
The ICE US dollar index finished the week at its highest level since April 2017.
Investors have been seeking to put money into perceived safer bets, such as the dollar, gold and US Treasury bonds, buoyed by expectations that the epidemic’s impact will be lesser felt in the United States.
"There is a cocktail of factors supporting the dollar at the moment," CNN quoted Win Thin, global head of currency strategy at Brown Brothers Harriman as saying.
The dollar has been rallying amidst forecasts by the Atlanta Federal Reserve's GDPNow model that US growth will accelerate to 2.6 per cent in the first quarter.
As the dollar surged across the board on an upbeat economy and coronavirus concerns, the euro plunged to its lowest level against the dollar in 34 months.