WASHINGTON: The coronavirus epidemic has already disrupted economic growth in China and a further spread to other countries could derail a “highly fragile” projected recovery in the global economy in 2020, the International Monetary Fund has warned.
In a note prepared for G20 finance ministers and central bankers, the global lender mapped out a plethora of risks facing the global economy, including the fast-spreading coronavirus and a renewed spike in US-China trade tensions, as well as climate-related natural disasters.
Finance ministers and central bankers from the top 20 advanced industrialised economies will gather in Riyadh, Saudi Arabia, this week amid continued uncertainty about the impact of the coronavirus, known as COVID-19.
The IMF said risks remained skewed to the downside.
“The recovery could be derailed by a sharp rise in risk premia, triggered for example by a re-escalation of trade tensions, or a further spread of the coronavirus,” the Fund said.
The IMF note has blown holes in Chinese President Xi Jinping’s claims of China being able to still meet its economic growth target for 2020 despite the epidemic.
“The coronavirus, a human tragedy, is disrupting economic activity in China as production has been halted and mobility around affected regions limited,” the Fund wrote in the note. “Spillovers to other countries are likely – for example through tourism, supply chain linkages, and commodity price effects.”
It said the impact of the virus was still unfolding, and while the current scenario assumed a quick containment of the virus and a bounce-back later in the year, the impact of the epidemic could be larger and longer-lasting.
“A wider and more protracted outbreak or lingering uncertainty about contagion could intensify supply chain disruptions and depress confidence more persistently, making the global impact more severe,” the Fund said in the note.
Cyber attacks, an escalation of geopolitical tensions in the Middle East or a breakdown in trade negotiations between China and the US could also impede the short-term global recovery, it said.
And climate-related disasters, rising protectionism and social and political unrest triggered by persistent inequality posed further economic risks.
The Fund urged policymakers to maintain fiscal and monetary policy support. Low inflation required monetary policy to stay accommodative in most economies, it said.