An escalation in the coronavirus outbreak could cut global economic growth in half and plunge several countries into recession this year, the Organisation for Economic Cooperation and Development has warned.
Sounding the alarm as the disease spreads around the world and rattles investors, the OECD said global GDP growth could plummet this year to as little as 1.5%, almost half the 2.9% rate it forecast before the outbreak took hold.
The downturn could be the “gravest threat” to the global economy since the financial crisis more than a decade ago, it warned.
Against a backdrop of already weak GDP growth, the economies of Japan and the eurozone could slide into recession this year, it added, while warning that failure in the UK’s post-Brexit trade talks with the EU also represented a significant downside risk.
The influential Paris-based group – which represents the world’s 36 most advanced economies – urged governments around the world to take greater steps to work together, calling for an international response as Covid-19 spreads.
What is Covid-19 - the illness that started in Wuhan?
It is caused by a member of the coronavirus family that has never been encountered before. Like other coronaviruses, it has come from animals. Many of those initially infected either worked or frequently shopped in the Huanan seafood wholesale market in the centre of the Chinese city.
Have there been other coronaviruses?
Severe acute respiratory syndrome (Sars) and Middle Eastern respiratory syndrome (Mers) are both caused by coronaviruses that came from animals. In 2002, Sars spread virtually unchecked to 37 countries, causing global panic, infecting more than 8,000 people and killing more than 750. Mers appears to be less easily passed from human to human, but has greater lethality, killing 35% of about 2,500 people who have been infected.
What are the symptoms caused by the new coronavirus?
The virus can cause pneumonia. Those who have fallen ill are reported to suffer coughs, fever and breathing difficulties. In severe cases there can be organ failure. As this is viral pneumonia, antibiotics are of no use. The antiviral drugs we have against flu will not work. Recovery depends on the strength of the immune system. Many of those who have died were already in poor health.
Should I go to the doctor if I have a cough?
UK Chief Medical Officers are advising anyone who has travelled to the UK from mainland China, Thailand, Japan, Republic of Korea, Hong Kong, Taiwan, Singapore, Malaysia or Macau in the last 14 days and who is experiencing a cough or fever or shortness of breath to stay indoors and call NHS 111, even if symptoms are mild.
Is the virus being transmitted from one person to another?
China’s national health commission has confirmed human-to-human transmission, and there have been such transmissions elsewhere.
How many people have been affected?
As of 4 March, the global death toll was 3,190, while more than 93,000 people have been infected in more than 80 countries.
The death toll has passed 3,000 in China, where there have been over 80,000 cases. South Korea, the nation worst hit by the outbreak outside China, has had 5,328 cases. More than 44,000 people in China have recovered from Covid-19.
There have been 87 recorded cases and no fatalities to date in the UK. There are 53 confirmed cases in Australia, with two deaths.
Why is this worse than normal influenza, and how worried are the experts?
We don’t yet know how dangerous the new coronavirus is, and we won’t know until more data comes in. The mortality rate is around 2% at the centre of the outbreak, Hubei province, and less than that elsewhere. For comparison, seasonal flu typically has a mortality rate below 1% and is thought to cause about 400,000 deaths each year globally. Sars had a death rate of more than 10%.
Another key unknown is how contagious the coronavirus is. A crucial difference is that unlike flu, there is no vaccine for the new coronavirus, which means it is more difficult for vulnerable members of the population – elderly people or those with existing respiratory or immune problems – to protect themselves. Hand-washing and avoiding other people if you feel unwell are important. One sensible step is to get the flu vaccine, which will reduce the burden on health services if the outbreak turns into a wider epidemic.
Is the outbreak a pandemic?
A pandemic, in WHO terms, is “the worldwide spread of a disease”. Coronavirus cases have been confirmed outside China, but by no means in all 195 countries on the WHO’s list. It is also not spreading within those countries at the moment, except in a very few cases. By far the majority of cases are travellers who picked up the virus in China.
Should we panic?
No. The spread of the virus outside China is worrying but not an unexpected development. The WHO has declared the outbreak to be a public health emergency of international concern. The key issues are how transmissible this new coronavirus is between people, and what proportion become severely ill and end up in hospital. Often viruses that spread easily tend to have a milder impact. Generally, the coronavirus appears to be hitting older people hardest, with few cases in children.
In an equally downbeat assessment, Roberto Azevêdo, the head of the World Trade Organization, said he expected the epidemic to have a substantial impact on the global economy.
“The effects on the global economy are also likely to be substantial and will start to show up in the trade data in the weeks to come,” he said.
The EU economy spokesman, Paolo Gentiloni, said the heavy impact of the virus on business activity would force the EU and European countries to increase spending. “The idea of a V-shaped recovery, returning quickly to growth, can’t be taken for granted and could prove optimistic,” he said.
He emphasised that EU rules allowed individual countries to respond to the crisis and they should act quickly to maintain confidence.
The OECD said its base-case scenario was for a short-lived but severe downturn, with the focal point for the economic damage in China. It forecast global growth would slide to 2.4% for 2020 as a whole, down from an already weak 2.9% last year.
Even under its central forecast, the OECD said global growth could shrink in the first quarter. Chinese growth is expected to fall below 5% this year, down from 6.1% last year – which was already the weakest growth rate in the world’s second largest economy in almost 30 years.
However, the outbreak could also cause a “domino scenario” whereby global growth is severely damaged in 2020 by the virus spreading throughout advanced economies across the northern hemisphere. Alongside growth slowing by about 1.4% over the course of the year to as little as 1.5%, financial markets around the world would also crash by about 20% under this scenario.
Saying that world leaders needed to act swiftly, the OECD called for greater support for healthcare systems and workers, and for nations to protect the incomes of their most vulnerable social groups and businesses.
Laurence Boone, the OECD’s chief economist, has warned that central banks would be unable to protect economies from the coronavirus on their own. “We do not think this is a shock that can be managed by central banks alone,” she said.
Her comments followed a statement from the Bank of England that it would “ensure all necessary steps are taken to protect financial and monetary stability”.
In a rebuke to Washington and Beijing, Boone said the US and China should end their trade war, during which import tariffs have increased on hundreds of billions of dollars worth of goods.
Boone said global cooperation was needed to cope with the crisis and Washington and Beijing would signal a return to a more cooperative stance if they dispensed with tariffs imposed over the last two years.
John McDonnell, Labour’s shadow chancellor, said the UK government needed to signal what efforts it would make if the situation deteriorated.
“The government should be ready to intervene with a fiscal stimulus if necessary, and work internationally to coordinate economic interventions,” he said.
“The OECD report makes clear that governments need to be clear-sighted and coordinated in responding to the threat of coronavirus, and at the moment that leadership is sorely lacking from the chancellor and prime minister.”
Since the outbreak in January, close to 85,000 people have been infected worldwide, with a fast-rising share of these outside China. Italy has been hardest hit so far in Europe at a delicate moment for the nation, with the eurozone’s third largest economy already shrinking. Stock markets around the world tumbled last week by more than 10% in the worst week since the global financial crisis as fears mount.
