The Organization for Economic Cooperation and Development (OECD) on Monday cut this year’s global growth projection to 2.4 percent, the lowest level since 2008 financial crisis, warning that global economy risks further downturn unless governments take actions to limit the spread of coronavirus.
“Global growth, cooling for the past two years to a subdued level, has been dealt a nasty blow by the coronavirus … the OECD expects a sharp slowdown in world growth in early 2020,” said Laurence Boone, OECD chief economist.
In its interim economic outlook, the Paris-based think-tank lowered its forecast by 0.5 percentage points from 2.9 percent previously estimated, citing significant economic disruption from quarantines, restrictions on travel, factory closures and a sharp decline in many service sector activities.
“In a downside-risk scenario where epidemics break out in some other countries across the globe, the slowdown will be sharper and more prolonged,” she warned.
Broader contagion across the wider Asia-Pacific region and advanced economies could cut global growth to as low as 1.5 percent this year, said the OECD, warning that “the world economy is now too fragile for governments to gamble on an automatic sharp bounce-back.”
In the euro area, where the number of infection cases is increasing, growth was set at 0.8 percent, down from 1.1 percent in November.
“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions,” said Boone.
“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 said.
The outlook suggested that flexible working should be used to preserve jobs. Governments should implement temporary tax and budgetary measures to cushion the impact in sectors most affected by the downturn such as travel and tourism, and the automobile and electronic industries.