IMF chief says the outbreak could derail global economic growth

International Monetary Fund (IMF) Managing Director Kristalina Georgieva delivers her curtain raiser speech previewing the key issues to be addressed in the Annual Meetings in Washington, DC, on October 8, 2019.

NICHOLAS KAMM | AFP | Getty Images

International Monetary Fund head Kristalina Georgieva said the new coronavirus, or COVID-19, outbreak is the “most pressing uncertainty” facing the world economy right now.

The international health emergency that “we did not anticipate in January” now threatens to derail global economic growth that was already under pressure from a global trade war and Brexit, she said Wednesday in a blog post published on the IMF’s website.

“It is a stark reminder of how a fragile recovery could be threatened by unforeseen events,” she added.

The virus has already slowed China’s economic growth this year, Georgieva said, just how much depends on efforts by world leaders to contain the fast-spreading outbreak.

“If the disruptions from the virus end quickly, we expect the Chinese economy to bounce back soon,” she wrote, adding that China’s GDP growth would drop sharply in the first quarter of 2020, it would be a minor hit on the year. “Spillovers to other countries would remain relatively minor and short-lived, mostly through temporary supply chain disruptions, tourism, and travel restrictions.”

Originating in the city of Wuhan, the new coronavirus has infected more than 75,200 people in over two dozen countries, killing at least 2,000 people as of Wednesday.

To contain the virus, cities around China have issued quarantine orders that have effectively shut down typically bustling places. The outbreak, as well as the effort to contain it, has already led multinational companies like Apple to warn investors about reduced demand and supply chain interruptions.

The IMF’s Georgieva warns that a long-lasting outbreak would have significant consequences for the Chinese and global economies.

“Its global impact would be amplified through more substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China,” she said in the post.

Georgieva told CNBC recently that this week and next are crucial in determining the economic impact of the outbreak as factories throughout China are set to resume operations. She also cautioned against comparing the COVID-19 outbreak to SARS in 2003, which some economists estimate cost the global economy $45 billion.

China only represented 8% of the world economy in the early 2000s and now makes up a 19% share, she pointed out.

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