OECD Cuts Global Outlook On Severe Impact From Covid-19 Outbreak

• Central banks pledge to ensure stability as virus fears mount

• Stock selloff resumes, bonds rally on growth fears

• Virus pushes global economy toward first contraction since 2009

 
The Organisation for Economic Co-operation and Development downgraded its global growth outlook on Monday, saying the impact of the Covid-19 outbreak on economic prospects is set to be severe.

The Paris-based think tank lowered the global growth projection for this year by 0.5 percentage points, while prospects for China was revised down markedly, with growth seen slipping below 5 percent this year.

In the Interim Economic Assessment, the OECD said global GDP growth is projected to drop to 2.4 percent in 2020 from an already weak 2.9 percent in 2019. The forecast for 2021 was trimmed to 3.3 percent from 3.6 percent.

The OECD urged governments to act swiftly and forcefully to overcome the coronavirus and its economic impact. If downside risks materialise, and growth appears set to be much weaker for an extended period, then co-ordinated multilateral actions should be taken, the agency added.

China’s economy is projected to expand 4.9 percent this year versus the previous forecast of 5.7 percent, before recovering to over 6 percent in 2021.

The adverse impact on confidence, financial markets, the travel sector and disruption to supply chains contributes to the downward revisions in all G20 economies in 2020, particularly ones strongly interconnected to China, such as Japan, Korea and Australia.

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Πηγή: rttnews.com

 
Central banks pledge to ensure stability as virus fears mount

Global central bankers from Japan to the U.K. promised to act as needed to stabilize financial markets rattled by the spreading coronavirus as pressure builds on monetary policy makers to do more to safeguard their economies.

In an emergency statement on Monday, Governor Haruhiko Kuroda said the Bank of Japan would “strive to provide ample liquidity and ensure stability in financial markets.” The Bank of England followed up by saying it’s working with U.K. authorities and international partners to “ensure all necessary steps are taken to protect financial and monetary stability.”

The commitments came after Federal Reserve Chairman Jerome Powell on Friday opened the door to cutting interest rates in the U.S. to contain what he called the “evolving risks” to economic growth from the virus.

The prospect of central banks’ action helped halt the worst rout in stocks since the global financial crisis more than a decade ago. Money markets now see the Fed lowering its main rate by 50 basis points this month and give a 70 per cent chance the European Central Bank will pare its by 10 basis points.

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Stock selloff resumes, bonds rally on growth fears

An overnight rally in U.S. stock futures evaporated on Monday as the equity selloff sparked by the rapidly spreading coronavirus resumed. Treasuries surged, sending the 10-year rate closer to on per cent.

Contracts on the S&P 500 index dropped, wiping out a gain of as much as 2.4 per cent earlier that had been sparked by hopes for coordinated central bank action to combat the impact of the virus. Sentiment soured as more countries reported their first virus cases and the OECD said world growth will sink to levels not seen in over a decade as the outbreak hammers demand and supply.

European shares also reversed a big early jump, with stocks under the most pressure in Italy, the epicenter of the region’s infections. Most core European bonds gained, tracking Treasuries as they rallied for an eighth day. The dollar slipped versus most major currencies as the euro surged.

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Virus pushes global economy toward first contraction since 2009

Global economic growth will sink to levels not seen in over a decade as the coronavirus outbreak hammers demand and supply, challenging central banks and governments to respond to a fast-changing situation, according to the OECD.

As central banks around the world try to calm a market panic, the Paris-based group also warned of possible global contraction this quarter. It cut its full-year growth to just 2.4 per cent from 2.9 per cent, which would be the weakest since 2009.

If the situation worsens, “co-ordinated policy actions across all the major economies would be needed” for health care and economic stimulus, it said.

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Πηγή: bnnbloomberg.ca