The coronavirus is taking a toll on many sectors of the global economy. It seems early to determine the far-reaching effect that the near-pandemic has on the world economy.
But, the OECD has already revised its growth forecast downwards for the global economy as the virus continues spreading outside of China. The organization anticipates that the effect of the COVID-19 outbreak will be severe as elaborated in its latest Interim Economic Assessment Report.
OECD projects that the outbreak will result in a 0.5% point downward revision of the forecast that it had published for global GDP growth in 2020.
The OECD now postulates that the world economy will grow by 2.4% in 2020, down from its November 2019 forecast of 2.9%.
The expected growth will be the lowest economic expansion experienced since the end of the 2008 financial crisis. It might also represent the trough of the current slowdown subject to how long this crisis will persist and how quickly China’s economy can bounce back to normalcy.
Impact on China
The economy of the epicentre of the coronavirus outbreak is unsurprisingly going to be affected the most by the epidemic.
In that context, the OECD cut China’s growth forecast from 5.7% to 4.9%. It cited restrictions on the movement of goods, people, and services and containment measures put in place.
China is striving to contain the spread of this virus by closing factories due to sharp declines in domestic demand and manufacturing output. The rest of the world is also affected. Many countries now face supply chain disruptions due to their reliance on China.
Business travel and tourism are also affected, with many people choosing to stay away from the regions that are reported to be profoundly affected. The OECD warns that global growth might drop to 1.5% in 2020 if other advanced economies encounter similar disruptions suffered by China.