G20 sees need to co-ordinate coronavirus response as IMF trims growth forecasts

IMF Managing Director Kristalina Georgieva speaks during a news conference in Rabat, Morocco - Reuters

RIYADH (Reuters): The world’s top economies called on Saturday for a co-ordinated response to the coronavirus outbreak, which the IMF predicted would lower China’s growth this year to 5.6% and shave 0.1 percentage points from global growth.

International Monetary Fund Managing Director Kristalina Georgieva presented the outlook to central bankers and finance ministers from the Group of 20 countries, but said the IMF continued to look at more dire scenarios. The China outlook is 0.4 percentage points lower than it was last month.

China reported a sharp fall in new deaths and cases on Saturday, but the World Health Organisation (WHO) warned it was too early to make predictions about the outbreak and said it was concerned about the number of new infections in other countries with no clear link to China such as travel history or contact with a confirmed case.

“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,” Georgieva said.

“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.”

China, which 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, has said it could still meet its economic growth target for 2020 despite the epidemic.

Japan’s finance minister said almost all the G20 countries mentioned the risk posed by the coronavirus during the gathering in Riyadh and that he had warned of a serious impact on the global economy if it spreads further.

“But it’s hard to grasp what is happening as there’s relatively little information. I can say today’s participants called for the need to co-ordinate (in responding to the virus impact),” Taro Aso told reporters.

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The latest draft communique gives less prominence than an earlier version to the outbreak as a growth risk, saying only that the G20 would “... enhance global risk monitoring, including the recent outbreak of COVID-19,” the medical acronym for the coronavirus.

A source familiar with the discussions said the G20 countries had not made plans for any separate committee or meetings to co-ordinate a response.

Georgieva said the Chinese authorities were working to mitigate the negative economic impact with crisis measures, liquidity provision, fiscal measures and financial support.

“While the impact of the epidemic continues to unfold, the WHO’s assessment is that with strong and co-ordinated measures, the spread of the virus in China and globally can yet be contained and the human tragedy arrested,” she said.

The coronavirus outbreak may curb demand for oil in China, which has reported more than 2,000 deaths, and other Asian countries, further depressing oil prices, industry body the Institute of International Finance has said.

Georgieva said global co-operation was essential to containing the virus and its economic impact, particularly if the outbreak turned out to be more persistent and widespread.

She said it was imperative to recognise the potential risk for fragile states and countries with weak health care systems, adding that the IMF was ready to provide grants for debt relief to its poorest and most vulnerable members.