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Economic growth and COVID-19

Washington, DC - June 04, 2018: Emblem of International Monetary Fund on the Headquarters 2 Building (HQ2) in DC. Economic growth concept (IMF regulator).
Image credit: bumbledee / 123rf

Economic growth is taking a hit from the global outbreak of the novel coronavirus (COVID-19). However, the International Monetary Fund (IMF) has stressed that it is likely too early to panic. 

“There may be a cut that we are still hoping would be in the 0.1-0.2 percentage space,” commented the IMF’s managing director Kristina Georgieva earlier this week. She emphasised that “it is too early to say because we don’t yet quite know what is the nature of this virus. We don’t know how quickly China will be able to contain it. We don’t know whether it will spread to the rest of the world.” As such, Georgieva urged that people refrain from “[jumping] to premature conclusions” as “there is still a great deal of uncertainty.” 

Georgieva said that the spread of the COVID-19 outbreak beyond China’s borders is “not a major issue for now.” However, this may change should comparatively weaker public health systems “for example in Africa” become affected by the virus. “Ask me again in ten days,” she said. 

The IMF earlier downgraded the World Economic Outlook by 0.1 percent, translating to an economic growth projection of 3.3 percent. Rapid containment of the disease, Georgieva stated, could lead to “a sharp drop and a very rapid rebound.”

Moody’s, an American-based financial services company and ratings agency, cut its economic growth projection for India in 2020 from 6.6 percent to 5.4 percent and in 2021 from 6.7 percent to 5.8 percent. “Among emerging market countries, we have materially revised downward our growth forecasts for India, Mexico and South Africa,” the agency explained. “In all four cases, the revisions reflect wholly domestic challenges, rather than external factors.” However, it did not discount the impact of the COVID-19 outbreak on global economic growth. The virus’s outbreak has resulted in a large-scale lockdown in China and is anticipated to adversely affect multiple industries and sectors in India such as pharma and tech. 

The impact of COVID-19 has been felt largely, but far from solely, in China. The country, whose Hubei province houses the outbreak’s epicentre in its capital city Wuhan, reports the overwhelming majority of cases and fatalities due to COVID-19. Well in excess of 70,000 cases have been reported at the global level and almost 2,000 fatalities have been recorded at the time of writing.

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