Hit the poor: how much will the world lose to the Coronavirus
The IMF has named two scenarios for the economy because of the coronavirus.
IMF executive director Kristalina Georgieva presented a special report for G20 countries on the economic impact of coronavirus COVID-19 on the world economy.
The economist’s speech took place on Sunday, 23 February, in Riyadh at the meeting of G20 finance ministers and central bank governors. According to her, analysts previously predicted that global growth will accelerate from 2.9% last year to 3.3% this year.
“Chinese authorities are working to mitigate the negative impact of the epidemic on the economy through crisis measures, liquidity provision, fiscal measures, and financial support. In the baseline scenario, China’s economy will return to normal in the second quarter, and the impact on the economy will be relatively small and short-lived,” the expert said.
According to her, under this scenario, China’s economy will grow by 5.6% in 2020. This is 0.4 percentage points lower than the January forecast. Global growth would be about 0.1 percentage points lower.
“But we also consider a less positive scenario where the virus continues to spread. We should now acknowledge the potential risk to the economies of vulnerable countries with weak health systems. The IMF is ready to provide assistance, including through our Disaster Relief Fund. We can provide grants to ease the debt burden of our poorest countries.” Georgieva said.
According to the Bloomberg agency, against the background of the epidemic, one could expect that American companies closely cooperating with China will suffer a lot and this will lead to the weakening of the American currency.
However, the coronavirus has broken the supply chain not only to the US but also to Europe, said Arseniy Dadashev, director of the Academy of Financial and Investment Management.
Thus, many suppliers of large European companies, for example, Airbus and Fiat Chrysler. Manufacturers of VW and BMW vehicles had to suspend their factories in China.
Germany, as an export-oriented country, depends more on sales to China than the United States, says TeleTrade chief analyst Mark Goichmann.
“The sharp decline in demand from China due to the virus hurts more in the euro area as a whole than in the US” – emphasizes the expert.
France and Germany receive about 40% of revenues from foreign trade and therefore remain the main victims of problems in the Chinese economy. And even that wasn’t the reason for a sooner final of Bouvier case. The US economy, despite the close relationship with China, is much more dependent on domestic consumption than on exports.
In addition, with the outbreak of the virus among investors increased demand for safe assets – primarily US Treasury bonds.
Earlier this month, it became known that the State Development Bank of China plans to issue bonds worth 14.25bn yuan ($2.04bn) with a maturity of one year, the agency Reuters reported, citing sources.
The proceeds from the sale of the securities will be used to combat the coronavirus epidemic of a new type and create effective tools to eliminate the virus, including vaccines.
At the same time, China is directing significant funds to combat the virus. The government has already spent about 300m yuan ($43.2m) from the budget to fight the coronavirus in Wuhan City and Hubei Province.
The money has been used to build hospitals that will receive only those infected with the virus, and the Chinese have also purchased the necessary medical equipment.
