OECD cuts 2020 global growth outlook on coronavirus outbreak

Kyodo News

Posted at Mar 02 2020 09:40 PM

OECD cuts 2020 global growth outlook on coronavirus outbreak 1
Employees wearing face masks work on a car seat assembly line at Yanfeng Adient factory in Shanghai, China, as the country is hit by an outbreak of a new coronavirus, Feb. 24, 2020. Aly Song, Reuters

TOKYO - The Organization for Economic Cooperation and Development on Monday lowered its forecast for global economic growth this year, citing the impact of the new coronavirus epidemic on the manufacturing and travel sectors.

The world's gross domestic product is likely to expand a real 2.4 percent in 2020, down from an earlier forecast of 2.9 percent released in November and 2.9 percent growth in 2019, the OECD said in its latest economic report.

The latest estimate was based on the assumption that the epidemic would peak in China in the first quarter of 2020 and outbreaks in other countries would prove mild, according to the interim report for a biannual OECD economic assessment.

"The coronavirus (COVID-19) outbreak has already brought considerable human suffering and major economic disruption," the OECD said. "Output contractions in China are being felt around the world, reflecting the key and rising role China has in global supply chains, travel and commodity markets."

In the event of "a longer lasting and more intensive coronavirus outbreak, spreading widely throughout the Asia-Pacific region, Europe and North America," global growth this year could drop to 1.5 percent, the Paris-based organization said, adding that the prospects "remain highly uncertain."

Meanwhile, global GDP in 2021 is expected to expand 3.3 percent, up from a forecast in November of 3.0 percent, if the effects of the virus outbreak fade as assumed under the optimistic scenario, the report said.

By country, economic growth in China, the epicenter of the COVID-19 outbreak, is projected at 4.9 percent in 2020, lower than the previous forecast of 5.7 percent and the 6.1 percent expansion logged in 2019. The world's second-largest economy is projected to grow 6.4 percent in 2021, up from 5.5 percent forecast earlier.

The report said "the adverse impact on confidence, financial markets, the travel sector and disruption to supply chains" contributed to downward revisions for all Group of 20 major economies this year, particularly "Japan, Korea and Australia" that are strongly interconnected with China.

The organization cut its forecast for Japanese economic growth to 0.2 percent in 2020 from its previous estimate of 0.6 percent but left unchanged its 2021 outlook at 0.7 percent. Japan logged growth of 0.7 percent in 2019.

South Korea and Australia are expected to register economic growth of 2.0 percent and 1.8 percent this year, down 0.3 percentage points and 0.5 percentage points, respectively, from previous projections.

The U.S. economy, which grew 2.3 percent last year, is expected to see a limited impact from the virus, with growth in 2020 cut to 1.9 percent from the November forecast of 2.0 percent.

Growth in the eurozone is projected at 0.8 percent in 2020, down from an earlier estimate of 1.1 percent.