Take notice of the OECD: the world can lose up to 50% of economic growth by the coronavirus

G7 is mobilized to mitigate the impact of the epidemic of the COVIDIEN-19 on growth

8 min.  Barcelona 02/03/2020 14:00

PAULA SOLANAS

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OECD, the organization that brings together developed economies, has already made a first estimate of the crash will mean the Covidien-19 on global growth. According to its updated estimates Monday, the epidemic originated in China may have an impact on gross domestic product (GDP) of the world of between 0.5% and 1.5% depending on the evolution of the current scenario. Thus, the agency has lowered growth forecasts for the world economy for 2020 to 2.4%, five tenths less than the previous publication. This implies a reduction of the growth of 17%.

For now two hypotheses arise. First, that the outbreak is contained to the highest in China, and this causes a reduction of 0.5% in global GDP this 2020. This reduction is explained by factors such as falling demand in the country, but also the bags, raw materials and uncertainty when push through new investments. Shake would be concentrated in the first quarter and would mitigate for the rest of the year.

The most pessimistic scenario stands at worst an expansion of the disease throughout the Asia-Pacific and much of the northern hemisphere. This context exacerbate the collapse of world GDP at 1.5%, which would mean a cut of growth in almost half than expected. In this case, also it occurs as a result of falling demand, but the impact would extend beyond China and its neighboring countries, and from the second quarter would lead to noticeable in Europe and America of the North and other states that rely on oil exports.

OECD estimates for China are not very encouraging. The agency expects the economy of the Asian giant grow only 4.9% this year compared to the last forecast of 5.7%. However, in view of the 2021 he expected to revive to 6.4% while the latest forecast stood at 5.5%. In this regard, it warns that the economic impact of the coronavirus will be greater than the SARS epidemic of 2003, because now China is more integrated into global trade, especially as a major importer of goods. In addition, the flow of Chinese tourists is also much higher than 17 years ago.

Beyond the OECD, the other two major agencies international economic, the World Bank and the International Monetary Fund (IMF) have shown "fully committed to providing" financial support to states that need to curb the spread of the virus. "The IMF and the World Bank are prepared to help our member countries to cut human tragedy and economic challenge that comes with Covidien-19. We are in contact with international institutions and national authorities, with particular attention to poor countries where health systems are weaker and more vulnerable people , "said the managing director of the IMF, Kristalina Georgieva, and the president of World Bank, David Malpass, in a joint statement.

"We will use the instruments available to the maximum extent possible, including emergency funding, policy advice and technical assistance. In particular, we have fast credit facilities that collectively can help countries respond to a wide range of needs , " they added . Both institutions believe cooperation worldwide is "essential" to stop the spread of the Covidien-19 and minimize their economic impact.

MONETARY STIMULUS MORE

What do you recommend OECD governments against this crisis? The agency says they have to act "now" and proposes a series of measures to mitigate the disaster. Primarily, urges expand monetary policy extreme that we have not abandoned the ECB and the Fed already raised recover and inject more money into the economy to counter the collapse in demand. Moreover, it also suggests reducing or delaying tax payments in the sectors most affected and increase public spending, especially in health.

Indeed, the vice president of the European Central Bank (ECB), Luis de Guindos, said Monday that the agency "is prepared" to act on the effects on the economy of the spread of the virus. However, at a conference in London, former Spanish economy minister has admitted that the Covidien-19 added "a new layer of uncertainty in the outlook for global growth and the euro zone." "The governing council is ready to adjust all their instruments, as appropriate, to ensure that inflation evolves toward its goal of sustainable way , " said ha. Guindos also stressed that the entity "closely monitor" the data to react quickly if necessary.

THE G-7 MOVILIZA

The countries of the G-7 also will launch "coordinated action" to limit   the impact of the coronavirus on economic growth  , and finance ministers will discuss this week by phone what is the best way to deal with the situation, as explained Monday French Minister Bruno Le Maire. Speaking to the television channel France 2, he has assured the leader has already spoken to the secretary of the US Treasury, Steven Mnuchin, and this week "coordinated" answers.

Le Maire has also said he will talk to the president of the European Central Bank (ECB). "We must act so that the impact we know it will be important for growth as limited as possible," the French politician. Until Sunday his country had confirmed 130 cases of Covidien-19, 30 more than in the previous day.

In this sense, has admitted that while the epidemic of the coronavirus was limited in China, had predicted that the crisis would cut by 0.1% of GDP in France in 2020. "Now that the outbreak is coming to other countries, the impact on French growth will be much more relevant , "he has recognized. However, he said it is too early to give a new forecast. According to Le Maire, the hotel industry, catering, air transport and events have been the sectors most affected by the crisis so far.

CONSEQUENCES OF A GLOBAL THREAT

airlines

The airlines already provide annual losses of 1,500 million dollars this year because of the coronavirus. Only between companies Persian Gulf a fall in profits of 100 million is estimated. IATA warns that if the restrictions are maintained on travel in Asia, these airlines are in "significant risk" after in recent weeks has subsided sale of airline tickets.

Renault

The automotive company admitted yesterday that is using planes, trains and trucks with three drivers to transport components from China to the rest of the company has factories in the world. With this exceptional measure, the French brand (soon to be led by the former president of Seat, Luca de Meo) hopes to avoid delays in making cars because of the coronavirus.

Nike

Coronavirus outbreak has also affected one of the leading manufacturers of sportswear world. Nike has closed its European headquarters, located in the Netherlands, at the least yesterday and today, after a worker infected multinational stay. According to the agency ANP, the company sanitize office Hilversum, where 2,000 people work. The employee is quarantined at home for 14 days.

Hall of the Paris Book

The Hall of the Book of Paris, the largest literary event in France, has been suspended following the coronavirus. The book fair had to develop 20 to March 23 in Versailles, but those responsible for the canceled appointment to respect "the decision of the government to ban gatherings of more than 5,000 people in confined areas." In parallel, yesterday the Museum of the Louvre decided to close to prevent the spread of the virus.

MotoGP

Sunday was to begin the MotoGP World Championship, but the first race (in Qatar) has been canceled and, second, (in Thailand), postponed. Only in Qatar Moto2 races and Moto3, which are already pre - season will be made. According to Dorna, the GP of Qatar was canceled by indications from the authorities the country by restrictions on pilots from Italy. Thailand has been postponed by the temporary ban on events that bring many people.

Bankruptcy to a cruise operator

A company operating a cruise restaurant in the Japanese city of Kobe on Monday declared bankrupt by the impact they have had in business since January cancellations due to concerns over the outbreak of coronavirus. The company operated the Luminous Kobe 2, one of the largest cruise Japanese restaurant, with capacity for 1,000 passengers. The parent company will take care of the reservations they had made customers

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