In its latest global economic assessment report released on Monday, the OECD lowered its forecast for global economic growth in 2020 to 2.4% from 2.9% before the outbreak of the new crown, warning that if the outbreak lasts longer and is more intense, it could bring the global economic growth rate to 1.5% in 2020.
In addition, the OECD calls for coordinated multilateral action (fiscal and monetary policy) by countries around the world. Finance ministers and central bank governors from the seven major economies, led by the US, will hold a conference call on Tuesday to discuss how to deal with the epidemic together.
The OECD reported that if the outbreak in the first quarter of 2020 proved to be controllable globally, the global economic growth rate is expected to be reduced to 2.4% this year from the previous 2.9%. At the same time, the OECD also warned that the global growth in the first quarter may be negative, and the world economic growth in the first half of 2020 is likely to slow sharply.
In addition, the adverse effects of the epidemic on market sentiment, financial markets, tourism industry and supply chain disruption have led the OECD to lower its growth expectations for most of the world’s economies in 2020.
However, the OECD points out that if the intensity of the new crown epidemic is greater and lasts longer, it may reduce the global economic growth rate to 1.5% in 2020. However, the OECD predicts that if the epidemic is properly controlled, the global economic growth rate will rebound to 3.25% in 2021 when the impact of the epidemic gradually subsides.
Epidemic prevention measures and fear of infection will hit global production and consumer spending and even put economies, including Japan and the eurozone, at risk of recession, the report said.
Therefore, the OECD calls on governments to ensure effective and well resourced public health measures to prevent infection and transmission, and to implement targeted policies to support health care systems and staff, as well as to protect the incomes of vulnerable social groups and businesses during the outbreak of the virus.
After the future relief of the epidemic, supportive macroeconomic policies can help to restore confidence and help demand recovery, but can not offset the direct impact of forced closure and tourism restrictions. In the report, the OECD pointed out that if the downside risks become a reality and the economy seems to slow down significantly in a long period of time, coordinated multilateral actions (such as jointly increasing fiscal expenditure) will be the most effective means to restore confidence and support income.
Central banks send pigeon signals one after another
On February 28, Federal Reserve Chairman Powell said in a statement, “appropriate tools and actions will be taken to support the economy.”
On March 2, Bank of Japan governor tohiko Kuroda said the bank would provide sufficient liquidity through market operations and asset purchases.
On March 2, the Bank of England also publicly stated that it was working closely with the Ministry of finance, the financial conduct authority (FCA) and international partners to ensure that all necessary measures were taken to protect the financial and monetary system from the impact of the epidemic.
In addition, this week the central banks of Australia and Canada will also open interest rate resolutions. Goldman Sachs had expected the RBA to cut interest rates by 25 basis points in a row at its policy meeting starting in March, and said it would “not rule out” a 50 basis point cut on Tuesday.
Market expectations for monetary and fiscal policy support for major economies are growing and a new round of interest rate cuts is expected this week.