The COVID-19 virus outbreak presents the greatest danger to the world economy since the global financial crisis and governments must act now to limit its spread, the Organization for Economic Cooperation and Development warns.
The OECD's latest Interim Economic Outlook, published Monday, said the spread of COVID-19 beyond China is causing "human suffering and economic disruption."
The OECD downgraded its growth forecasts. Under a best-case scenario of limited outbreaks outside China, world growth is expected to be 2.4% in 2020, down from a November projection of 2.9%.
G20 countries are now expected to grow at 2.7%, down 0.5 percentage points vs. the previous outlook; and eurozone country GDP is projected to be 0.8%, down 0.3 percentage points. China growth is expected to fall 0.8 percentage points to 4.9% for 2020; U.S. growth was revised down 0.1 percentage points to 1.9%; and U.K. growth fell in the latest outlook by 0.2 percentage points to 0.8% in 2020.
COVID-19 is caused by a member of the coronavirus family that's a close cousin to the SARS and MERS viruses that have caused outbreaks in the past.
In addition to a best-case scenario — where the virus is broadly contained — a domino case where COVID-19 is more widespread was also presented in the outlook.
Both cases call for governments "to act swiftly and forcefully to overcome the coronavirus and its economic impact." Stimulus measures in addition to pre-coronavirus fiscal easing — in Canada, Germany, Japan and the U.K., for example — are necessary. "Additional stimulus measures could be implemented without endangering debt sustainability in a number of economies, including Australia and Germany," the outlook said.
However, the outlook noted that "the scope for sizeable discretionary fiscal easing is limited in some advanced countries with relatively high debt and budget deficits, but governments can still support economic activity by changing the structure of spending and taxes towards areas and actions that help to contain the effects of virus outbreaks and help support economic growth and incomes."
Further moves include allowing for flexible working conditions in order to preserve jobs and the provision of "adequate liquidity" to allow banks to help companies with cash-flow issues.
In the case of the domino scenario, in which global growth drops to 1.5% in 2020, "coordinated policy action within and across all the major economies is necessary for effective and timely economic stabilization," the outlook said.