A global agency says the spreading new coronavirus could make the world economy shrink this quarter for the first time since the international financial crisis more than a decade ago.
In a special report on the impact of the virus, the Organization for Economic Co-operation and Development (OCED) said Monday that the world economy is still expected to grow overall this year and rebound next year.
The global economy is set to grow only 2.4% this year, the lowest since 2009 and down from a forecast of 2.9% in November, the OECD said in an update of its outlook. It also said the figure could go as low as 1.5% if the virus outbreak lasts and continues to spreads.
The Paris-based policy forum projected that the global economy could recover to 3.3% growth in 2021, assuming the epidemic peaked in China in the first quarter of this year and other outbreaks proved mild and contained.
In addition to the “considerable human suffering” the virus has wrought, with more than 3,000 deaths worldwide, the OECD said, "Global economic prospects remain subdued and very uncertain."
"The main message from this downside scenario is that it would put many countries into a recession, which is why we are urging measures to be taken in the affected areas as quickly as possible," OECD chief economist Laurence Boone said.
The last time the world GDP shrank on a quarter-on-quarter basis was at the end of 2008, during the depths of the financial crisis. On a full-year basis, it last shrank in 2009.
The OECD said China's reduced production is hitting Asia particularly hard but also companies around the world that depend on its goods.
It urged governments to act fast to prevent contagion and restore consumer confidence.
The Paris-based OECD, which advises developed economies on policy, said the impact of this virus is much higher than past outbreaks because “the global economy has become substantially more interconnected, and China plays a far greater role in global output, trade, tourism and commodity markets.”
China’s viral outbreak has already disrupted global supply chains and cut business profits. And as the disease spreads, economists now worry about a graver scenario: That quarantines and greater caution among consumers will lead people to cancel travel plans, skip restaurant meals, avoid stores or stay home from work.
Already the EU's markets commissioner, Thierry Breton, estimated Monday that the virus has cost Europe 2 billion euros ($2.2 billion) this year in tourism revenue alone, mainly because of the drop in the number of Chinese tourists. Things are expected to get worse for Europe with the eruption of cases in northern Italy and the cancellation of events like the Venice Carnival.
