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Global Economic Growth Could Drop By Half Due to Coronavirus

It has been reported that the worldwide economy could grow at its slowest rate in a decade. The Organisation for Economic Cooperation and Development (OECD) has confirmed that the coronavirus outbreak could see this number halved in 2020.

The Prediction

The OECD has revised its predictions for economic growth in 2020 to 2.4%. This would mark a drop from the 2.9% registered in November of last year. It would also be the slowest growth rate seen since 2009.

Yet, this figure could be worse if the coronavirus outbreak gets more serious. They say that if it becomes “more intensive” or runs for longer then growth could fall to just 1.5% this year. In the longer-term, the OECD predicts a rise in global growth in 2021, possibly to 3.3%. This number is based on the outbreak proving to be relatively mild and possible to contain.

However, their predictions could prove to be on the optimistic side if the coronavirus continues to spread through Europe, Asia and North America. Some businesses have already started looking at international debt collection agency services to ease the current pressure. 

Laurence Boone is the chief economist at the OECD. He said that the main message to take from this study is that “many countries” would enter into recession if this happens. This is why he says that they are urging governments to take action in affected areas.   

What Efforts Are Being Made to Reduce the Impact?  

Last week was the worst since 2008 for the world’s most important stock markets. $1.5 trillion was lost from global share values as panic set in. It is now hoped that government and central banks act together to stop the situation from getting any worse. 

The Bank of England has already announced the intention of stabilising markets. This came after big losses were reported on the FTSE and on other major exchanges around the planet. They are said to be working closely with HM Treasury and the Financial Conduct Authority to protect financial stability.

In Japan and the US, the central banks have also sent out the message that they are ready to intervene if necessary. This helped the markets to open this week in a more positive mood.  

In China, a widely-followed but unofficial manufacturing purchasing managers’ index reported the worst level of contraction in the country’s factories since it began in 2004. The official numbers for manufacturing activity were just as weak. 

This comes as companies across China were forced to close following the Chinese New Year holiday. The official Purchasing Manager's Index showed a drop from 50 down to just 35.7 in January.

The fact that China is the biggest exporter of goods on the planet and carries out a third of all worldwide manufacturing activity means that these disappointing numbers will have a significant knock-on effect in other countries. 

The unknown factor is how quickly their factories can start producing again. A third of the country’s 300 million migrant workers are said to be still unable to work because of the strict quarantine rules that have been put in place.