The Organization for Economic Co-operation and Development’s (OECD) recent report expects the outbreak of the coronavirus (COVID-19) to create a severe impact on China and global economy.
“Restrictions on movement of people, goods and services, and containment measures such as factory closures have cut manufacturing and domestic demand sharply in China,” the OECD said. “The impact on the rest of the world through business travel and tourism, supply chains, commodities, and lower confidence is growing.”
The report offers a best and worse case scenario dependent upon how COVID-19 spreads. In either case, the OECID is imploring governments to take precautions and help limit the spread, protect people, businesses and the impact on the economy.
“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions,” said Laurence Boone, chief economist of the OECD. “Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand, and provide a financial lifeline to households and businesses that are most affected.”
In the best-case scenario, a slowdown in world growth is expected in the first half of 2020 as supply chains and commodities are hit, tourism decreases and confidence fades. The report anticipates global economic growth to fall 2.4% for the whole year compared to 2.9% in 2019, while a rise to 3.3% in 2021 is expected.
The OECID revised China’s growth to below 5% in 2020 compared to 6.1% in 2019.
But if COVID-19 continues to spread similarly as it did in China, it could decrease global growth as low as 1.5%, the OECD noted.
In the report, the OECD has urged for flexible work schedules, government implementation of temporary tax and budgetary measures to lessen the financial impact of decreased demand in sectors like travel, auto and electronics.
The OECD is a global policy forum that works to promote policies to improve economic and social well-being of people around the world.