The global recession is deepening as coronavirus-related restrictions exact a high economic cost and expect the real GDP to contract by 1.0 percent for Group of 20 emerging market economies in this year - Photo: Special

JAKARTA (TheInsiderStories) – Finance leaders from the Group of 20 (G20) called for a coordinated response to the coronavirus (COVID-19) outbreak, which the International Monetary Fund (IMF) predicted would pull down China’ growth this year to 5.6 percent and cut 0.1 percent from global growth.

IMF Managing Director Kristalina Georgieva, highlighted three other areas where international cooperation is key of the problems. First, she urged all the leaders work together to contain COVID-19—both its human and economic impact—especially if the outbreak turns out to be more persistent and widespread.

The IMF stands ready to help, including through our Catastrophe and Containment Relief Trust that can provide grants for debt relief to the poorest, most vulnerable countries, she adds. Second, the cooperation is required to further reduce uncertainty over global trade. Despite the Phase 1 deal, trade tensions have shaved 0.6 percent off this year’ global GDP. It remains essential to move from trade truce to trade peace.

Third, said Georgieva, the world must collaborate to scale up climate change mitigation and adaptation. She noted, “COVID-19 is a stark reminder of our interconnections and the need to work together. In this regard, the G20 is an important forum to help put the global economy on a more sound footing.”

Since that projection was made, she continued, the COVID-19 virus—a global health emergency—has disrupted economic activity in China and could put the recovery at risk. Above all, this is a human tragedy, but it also has negative economic impact.

“I reported to the G20 that even in the case of rapid containment of the virus, growth in China and the rest of the world would be impacted. Of course, we all hope for a V-shaped, rapid recovery—but given the uncertainty, it would be prudent to prepare for more adverse scenarios, said the managing director.

According to her, there are other risks which is high debt levels in countries and corporates could be affected by a rise in risk premia or an unanticipated tightening in financial conditions. Also, climate change has been associated with an increase in the frequency of natural disasters.

“With slow growth and low inflation, monetary policy should remain accommodative in most G20 economies. Fiscal policy should also be deployed—where space allows—to support economic prospects; this does not have to be costly and could be done through re-prioritizing spending toward high-return infrastructure and investment in people. At the same time, structural reforms should be implemented to boost productivity, growth, and jobs,” said Georgieva.

Beyond country-level policies, many challenges are global and require global solutions, she noted. In January, IMF projected global growth to strengthen from 2.9 percent to 3.3 percent in this year. In this scenario, 2020 growth for China would be 5.6 percent. This is 0.4 percentage points lower than the January update. Global growth would be about 0.1 percentage points lower, she adds.

“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.

Global cooperation is essential to the containment of the COVID-19 and its economic impact, particularly if the outbreak turns out to be more persistent and widespread. To be adequately prepared, now is the time to recognize the potential risk for fragile states and countries with weak health care systems.

China reported another fall in new cases on Sunday (02/23), but world health officials warned it was too early to make predictions about the outbreak as the number of new cases continued to increase in other countries. Worldwide, the number of COVID-19 cases reached 76,215 cases with 2,247 fatalities. This virus has also spread to 28 countries and created a global panic.

The world’ second largest economy is slowly getting back to normal, fears over the economic fallout from the spread of coronavirus beyond its borders remain to the fore, so remarks by global central bank officials will be watched for their outlook on the global economy.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com