G-20 calls for coordinated response to virus outbreak

The impact of the new coronavirus outbreak on global growth will be a key issue at this weekend’s meeting of G20 finance leaders.
International Monetary Fund managing director Kristalina Georgieva arriving at a historic site after the first meeting of finance ministers and central bank governors of the G-20, in Riyadh, Saudi Arabia, on Feb 22, 2020.
International Monetary Fund managing director Kristalina Georgieva arriving at a historic site after the first meeting of finance ministers and central bank governors of the G-20, in Riyadh, Saudi Arabia, on Feb 22, 2020.PHOTO: EPA-EFE

IMF trims growth forecast, expects impact to be relatively minor but is also looking at more dire scenarios

RIYADH • The world's top economies called for a coordinated response to the coronavirus outbreak, which the International Monetary Fund (IMF) predicted would lower China's growth this year to 5.6 per cent and shave 0.1 percentage point from global growth.

IMF managing director Kristalina Georgieva presented the outlook to central bankers and finance ministers from the Group of 20 countries last Saturday, but said the IMF continued to look at more dire scenarios.

The China outlook is 0.4 percentage point lower than it was last month.

China has reported a sharp fall in new deaths and cases, but the World Health Organisation (WHO) warned that it was too early to make predictions about the outbreak. It also 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," Ms 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."

Japanese Finance Minister Taro Aso told reporters: "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 coordinate (in responding to the virus impact)."

Indonesia backed calls for a coordinated global response, warning that the authorities may be underestimating its impact on trade and economic growth.

"All the economic ministers coming here, and the central banks, they have instruments and policy tools that they can implement and execute, including fiscal expansion if it's necessary," Finance Minister Sri Mulyani Indrawati said in a Bloomberg TV interview in Riyadh.

Ms Georgieva said global cooperation 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 healthcare systems, adding that the IMF was ready to provide grants for debt relief to its poorest and most vulnerable members.

A source familiar with the discussions said the G-20 countries had not made plans for any separate committee or meetings to coordinate a response. Ms 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 coordinated measures, the spread of the virus in China and globally can yet be contained and the human tragedy arrested," she said.

Overcoming US objections, the group's final communique includes a reference to climate change for the first time, G-20 diplomatic sources said.

The compromise language retained a reference to work by the Financial Stability Board to examine the implications of climate change on financial stability, although it dropped climate change from its list of downside risks to global economic growth.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 24, 2020, with the headline 'G-20 calls for coordinated response to virus outbreak'. Print Edition | Subscribe