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Coronavirus Poses 'Serious Threat', Global Growth to 'Dip Below' Last Year's Rate: IMF Chief

A file photo of IMF chief Kristalina Georgieva.  (Reuters)

A file photo of IMF chief Kristalina Georgieva. (Reuters)

IMF chief Kristalina Georgieva called for an all-out, 'no regrets' response to the new coronavirus epidemic which poses a 'serious threat' to the global economy.

The new coronavirus epidemic poses a "serious threat" and will slow growth in the world economy to below the 2.9 per cent posted last year, IMF chief Kristalina Georgieva said Wednesday.

The COVID-19 outbreak "is no longer regional issue, it is a global problem (that) calls for global response," Georgieva told reporters.

The epidemic's impact on confidence and steps to contain it are impacting economic activity, with the result that "global growth in 2020 will dip below last year's levels," she said.

The IMF in January forecast growth this year of 3.3 percent, which means at least a half point will be lost to the virus.

But "how far it will fall and how long the impact will be is still difficult to predict," she said.

Georgieva said the fund's analysis had assumed the virus would be largely confined to China, which would have led to a sharp but short economic slowdown, followed by a quick recovery.

"Unfortunately over past week we've seen a shift to a more adverse scenario for the global economy," due to the "sheer geographic spread of the epidemic around the world," impacting a third of the IMF's 189 member countries.

"At a time of uncertainty... it is better to do more than to do not enough," she said, warning that the impact of the COVID-19 outbreak will slow growth in the world economy to below the 2.9 percent posted last year.

The virus has infected over 93,000 people worldwide and killed more than 3,200 people, mainly in China.

And while Georgieva said the global financial system is in good shape now after being fortified in the wake of the 2008 crisis, "We do need to have measures that are bringing a sense of confidence," and prevent credit from freezing up.

The epidemic's impact on confidence and demand, as well as the steps imposed to contain it, are impacting economic activity, with the result that "global growth in 2020 will dip below last year's levels," she said.

The IMF in January forecast growth this year of 3.3 per cent, which means at least a half point will be lost to the virus.

But "how far it will fall and how long the impact will be is still difficult to predict," she said.

Georgieva said the fund's analysis had assumed the virus would be largely confined to China, which would have led to a sharp but short economic slowdown, followed by a quick recovery.

"Unfortunately over the last week we've seen a shift to a more adverse scenario for the global economy," due to the "sheer geographic spread of the epidemic around the world," impacting a third of the IMF's 189 member countries.

Georgieva and World Bank President David Malpass spoke to reporters after a conference call of finance officials from the member nations, who directed the IMF "to use all its available financing instruments to help member countries in need." "We are determined to provide the necessary support to mitigate the impact, especially on the most vulnerable people and countries," the statement from the governing body, the IMFC, said.

"We are determined to provide the necessary support to mitigate the impact, especially on the most vulnerable people and countries," the statement from governing body the IMFC said.

Georgieva said the Washington-based development lender has $1 trillion in overall financing capacity, including $50 billion available without a formal IMF programme, and $10 billion in no-interest funds for the poorest countries.

The World Bank on Tuesday announced it had $12 billion available to help countries respond to the coronavirus threat.

Malpass told reporters "the speed and breadth of the response is crucial to its effectiveness."

first published:March 04, 2020, 22:19 IST