Yesterday the OECD unsurprisingly lowered its global GDP forecast for this year by half a percentage point to 2.4%, the lowest rate of growth since the 2008-2009 financial crash. With global cases having risen above 90,000 in more than 60 countries, the forecast assumes that the virus will peak in the next couple of months, however, did warn that a more severe outbreak would weaken global growth considerably. The OECD said the central banks and governments needed to act ‘swiftly and forcefully’ in order to contain the virus and overcome its economic fallout.
In China, where the virus first emerged, the OECD now expects annual growth to be approximately 4.9%, down nearly 1% from its forecast at the end of last year. Of course, the knock-on effect that the measures taken by the Chinese authorities continue to have massive repercussions on the global supply chain with companies from Apple to Pfizer all reporting problems.
At 1200GMT today G7 finance ministers and central bankers will hold a teleconference call to discuss measures to counter the impact of the virus. The call, planned two and a half hours before U.S. stock markets open, will be led by Treasury Secretary Steven Mnuchin, increasing the likelihood of a globally coordinated central bank action. However, we do not expect to hear anything until at least an hour after the call has finished. Mnuchin and NEC Director Kudlow are already on record stating they favour an emergency cut from the Fed.
Meanwhile, both the World Bank and the IMF have said they are ready to help member countries deal with both the economic fallout of the virus and the human tragedy. In a joint statement, the President of the World Bank, David Malpass and the Managing Director of the IMF, Kristalina Georgieva said ‘We are engaged actively with international institutions and country authorities, with special attention to poor countries where health systems are the weakest and people are most vulnerable’, adding, ‘We will use our available instruments to the fullest extent possible, including emergency financing, policy advice, and technical assistance. In particular, we have rapid financing facilities that, collectively, can help countries respond to a wide range of needs. The strengthening of country health surveillance and response systems is crucial to contain the spread of this and any future outbreaks’.