COVID-19 puts global recovery at risk, modest growth expected: IMF to G20

COVID-19 puts global recovery at risk, modest growth expected: IMF to G20

Worker uses a thermometer to check the temperature of a customer as she enters a Starbucks shop as
A worker uses a thermometer to check the temperature of a customer as she enters a Starbucks shop as the country is hit by an outbreak of COVID-19, in Beijing, Jan 30, 2020. (Photo: Reuters/Carlos Garcia Rawlins)

RIYADH: The deadly coronavirus epidemic could put an already fragile global economy recovery at risk, the International Monetary Fund head told G20 finance ministers and central bank governors on Sunday (Feb 23).

Global growth was poised for a modest rebound to 3.3 per cent this year, up from 2.9 per cent last year, IMF chief Kristalina Georgieva said at the meeting in the Saudi capital.

"The projected recovery ... is fragile," Georgieva said.

"The COVID-19 virus - a global health emergency - has disrupted economic activity in China and could put the recovery at risk," she said in a statement.

"I reported to the G20 that even in the case of rapid containment of the virus, growth in China and the rest of the world would be impacted."

READ: China reports fewer COVID-19 cases outside epicentre Hubei

Alarm has been growing over the new virus as Chinese authorities lock down millions of people to prevent its spread, with major knock-on effects economically.

The virus has now claimed 2,345 lives in China, cutting off transportation, disrupting trade and fanning investor alarm as businesses are forced to close their doors.

Georgieva told the two-day Riyadh gathering that the outbreak would shave about 0.1 percentage points from global growth and constrain China's growth to 5.6 per cent this year.

The IMF chief urged G20 nations to cooperate to contain the spread of the virus.

"COVID-19 is a stark reminder of our interconnections and the need to work together," Georgieva said. "In this regard, the G20 is an important forum to help put the global economy on a more sound footing."

READ: Italy races to contain COVID-19 outbreak as cases rise to 132

The G20 finance ministers in a communique said "the continuation of accommodative financial conditions and some signs of easing trade tensions" are supporting global recovery.

"We will enhance global risk monitoring, including of the recent outbreak of COVID-19. We stand ready to take further action to address these risks," the statement said, using the medical acronym for the disease caused by the new coronavirus.

G20 COUNTRIES "READY TO INTERVENE"

As the delegates wrapped up their meeting, Chinese President Xi Jinping was quoted as saying that Beijing would step up policy adjustments to help cushion the blow on the economy from the outbreak.

"The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society," Xi said, adding the impact would be short-term and controllable.

READ: COVID-19 is communist China's 'biggest health emergency' - Xi Jinping

China was represented at the G20 meeting by its ambassador to Saudi Arabia, as senior officials stayed away due to the growing crisis over the virus.

"We have discussed the outbreak of coronavirus in China and other countries and all the G20 countries agreed collectively on being ready to intervene with necessary policies," Saudi Finance Minister Mohammed al-Jadaan told a news conference.

The epidemic has spread to nearly 30 countries and territories, with South Korea raising its infectious disease alert to its highest level on Sunday.

READ: South Korea reports 169 new COVID-19 cases; three more deaths

"In our current baseline scenario, announced policies are implemented and China's economy would return to normal in the second quarter. As a result, the impact on the world economy would be relatively minor and short-lived," IMF's Georgieva said on Saturday.

"But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted," she added.

The ministers and central bankers also encouraged further work by the Organisation for Economic Cooperation and Development (OECD) on global rules to tax digital giants like Google, Amazon and Facebook.

The OECD, the G20's think-tank, is to prepare technical assumptions by July that would allow governments to tax digital companies where they do business, rather than where they are registered for tax purposes.

A final agreement on the global rules is to be ready by the end of this year to avoid a proliferation of different digital tax regimes all over the world.

Key to the deal is the cooperation of the United States, which has been stalling progress unsure of the deal's political impact in a presidential election year.

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Source: Agencies/jt(aj)

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