The global spread of the novel coronavirus will wipe out any hope of stronger growth in 2020, International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday, adding a third of the Fund’s 189 member countries were now affected.
The Fund now expects 2020 world growth will be below the 2.9% rate for 2019, and revised forecasts will be issued in the coming weeks, Georgieva said at a news briefing.
The changed forecast would represent a more than 0.4 percentage point drop from the 3.3% growth the IMF had estimated for 2020 in January as U.S.-China trade tensions eased.
“Global growth in 2020 will dip below last year’s levels, but how far it will fall and how long the impact will be is still difficult to predict,” Georgieva said.
She declined to say whether the escalating health crisis could push the world into a recession.
The IMF is making available $50 billion in emergency funding that includes low- and no-interest loans that could aid poorer countries with weak health systems respond to the epidemic, she said after a call with the IMF’s steering committee.
The 24-member International Monetary and Financial Committee in a statement called on the Fund “to use all its available financing instruments to help member countries in need.”
Georgieva and World Bank President David Malpass underscored the importance of coordinated action to limit the economic and human impact of the virus.
The World Bank on Tuesday said it was providing $12 billion in immediate funds to help developing countries improve their health services, disease surveillance, and access to medical supplies.
Malpass said this includes ensuring that local businesses have access to working capital as public resources shift to deal with the health crisis.
Less than two weeks ago, the IMF told G20 finance leaders in Saudi Arabia that the virus could shave 0.1 percentage point off its January global growth forecast, a milder scenario based on expectations the coronavirus would be largely contained within China.
That view changed over the last week as the virus spread rapidly outside China to more than 70 countries, Georgieva said.
The shift has vastly increased uncertainty and caused demand worldwide to weaken, hitting trade and tourism hard and slashing demand for oil and other commodities as individuals and businesses took precautionary measures to avoid infection.
Meanwhile, in China, even as the spread of the virus has slowed, growth will be below the IMF’s most recent forecast for 5.6% in 2020, Georgieva said.
Still, the Fund was encouraged by the restart of some production in China, which is now at about 60% recovered and aiming to reach 90% in coming weeks, she said.
Georgieva said the world financial system was far more resilient than before the 2008-2009 financial crisis, but emphasized policymakers needed to take coordinated action and impose precautionary measures in case the outbreak worsens.
She declined to discuss more specific scenarios on potential downgrades in growth estimates, saying: “What helps is concentrating on actions. Who cares if it will be 0.1 or 0.4 or 0.5? If we act, and focus on that, lives would be saved, suffering would be reduced and the economy would perk up faster.”