The deadly coronavirus again makes global concerns but it has not yet developed into a pandemic, according to the World Health Organization (WHO) - Photo by CNN

JAKARTA (TheInsiderStories) – The deadly coronavirus again makes global concerns but it has not yet developed into a pandemic, according to the World Health Organization (WHO). So far, fatalities in China recorded 77,262 people have been infected and 2,595 died until Tuesday (02/25) morning, the agency data showed.

This increasing cases outside the country also put pressure on various sides. Italy has reported at least more than 200 cases with six deaths. While, cases in South Korea the virus spread rapidly and has reached 600 cases, also with 6 deaths.

On the other hand, many countries report their first cases such as Iran, Afghanistan, Bahrain and Kuwait. WHO says that new cases that occur make the situation and conditions very alarming at this time.

From United States, President Donald Trump administration requests approval from the Congress to pour a budget of US$2.5 billion to fight the virus. According to White House, more than $1 billion of the money will be used to develop vaccines, support preparedness and response activities and to procure much needed equipment and supplies.

So far the outbreak has influenced the financial market. The European market has experienced the biggest decline since June 2016. While, the S&P 500 has also experienced the deepest decline since February 2018 and yields on the 10-year US Treasury also fell to the lowest level since 2016.

Similarly, Asian currencies are powerless against the strong US Dollar, holding out in the red zone on Monday, as the spread of the coronavirus outside China is getting worse. On Monday, Korean Won led the weakening by moving down 0.89 percent, followed by the Malaysian Ringgit which corrected 0.82 percent, and Indonesian Rupiah weakened 0.81 percent.

In addition, throughout the year 2020 there is also not a single Asian currency that has an impressive performance. All Asian currencies move in the red zone on a year to date basis.

The worst performance was led by the Iraq Baht which fell 6.31 percent, followed by the Korean Won which dropped 5.26 percent, and the Singapore dollar which lost 4.02 percent.

Last weekend, finance leaders from the Group of 20 (G20) had 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.

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

Second, the cooperation is required to further reduce uncertainty over global trade. Despite the Phase 1 deal, she adds, trade tensions have shaved 0.6 percent off this year’ global GDP. It remains essential to move from trade truce to trade peace. And third, 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 the managing director.

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.

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.

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