(NEW YORK) — With the outbreak of the novel coronavirus, the global economy is facing its greatest threat since the financial crisis, according to the Organization for Economic Co-operation and Development’s interim economic outlook, released Monday.
“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions,” Laurence Boone, the OECD’s chief economist, said while presenting the findings during a teleconference Monday.
“Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected,” she added.
The organization presented two economic outlooks stemming from the coronavirus: A best-case scenario would mean a “temporary blow” to the world economy. The worst case scenario would be a “Domino scenario,” with broader contagion occurring.
In the latter, in which the disease spreads to other advanced economies and hits them with the same intensity as it has in China, the organization predicts annual global GDP growth could drop to 1.5% in 2020, half the rate projected before the outbreak.
Even in a best-case scenario, in which the outbreak is more limited, global growth is predicted to fall to 2.4% for the year, as supply chains are hit, tourism falls and confidence falters, according to the OECD.
To put the numbers in context, global growth in 2019 was 2.9%. Even 2.4% would be lower than in any year since the financial crisis of 2008.
“Containment measures and fear of infection would hit production as well as spending hard and drive many of the epidemic affected countries into outright recession,” Boone wrote of the worst-case scenario in a blogpost explaining their findings.
Boone noted that the world economy was already weakened by trade and political tensions, and that the outbreak has caused further uncertainty for households and firms.
“The world economy is now too fragile for governments to gamble on an automatic sharp bounce-back,” she said, calling for action.
The international economic policy organization also issued recommendations for how governments should act to mitigate economic impacts amid the outbreak.
Governments must act now to combat #coronavirus effects:
1⃣ Support the health sector & most vulnerable households
2⃣ Reduce pressure on firms in affected sectors
3⃣ Ensure effective coordination among countries
— OECD ➡️ Better policies for better lives (@OECD) March 2, 2020
The report urges that companies should allow flexible working hours to preserve jobs and that governments should implement temporary tax and budgetary measures for sectors most impacted by the downturn such as tourism, and the electronic and auto industries.
It also called on liquidity to be provided to banks in most-affected countries, to help companies while containment measures are being enforced.
The coronavirus has already delivered a heavy blow to the global economy, sending financial markets reeling over the past few weeks.
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