An unusually clear warning call comes from Paris: States must act to alleviate the consequences of the epidemic triggered by the novel corona virus. Can the central banks do it?
Paris (dpa) - The OECD is raising the alarm in the face of the Covid 19 epidemic: If it spreads further, the euro zone or Japan could slip into recession this year.
The chief economist of the industrialized nations organization, Laurence Boone, warned of this on Monday in Paris. Your message is clear: "Governments cannot afford to wait."
Economists speak of a recession if the economy shrinks in at least two consecutive quarters. "We are very careful," says the OECD expert, restricting the forecasts. However, one thing is already clear for the Organization for Economic Cooperation and Development (OECD): The spread of the epidemic triggered by the novel corona virus is depressing global economic growth.
The only question is how strong. In a scenario based on a comparatively limited outbreak outside of China, the OECD assumes growth of 2.4 percent - that's half a percentage point less than last predicted. In the previous year, the global economy had grown by 2.9 percent.
For Germany, an increase in gross domestic product of 0.3 percent is assumed, which is 0.1 points less than in November. In Italy, however, which is particularly affected by the new health crisis, the economy is forecast to stagnate.
If the outbreak of the novel coronavirus lasts longer and spreads widely across the Asia-Pacific region, Europe and North America, the OECD is afraid that the effects will be even clearer. In this case, global growth could drop to 1.5 percent in 2020.
With this negative scenario, a recession is also possible in important economic areas such as the euro zone or Japan. If Covid-19 spreads significantly more in countries in the southern hemisphere, a greater slump is possible - but this was not quantified by chief economist Boone. Given the situation, states should act now, the OECD appeals. "Don't add a financial crisis to the health crisis," said Boone.
In any case, the EU Commission is considering stimulus measures due to the coronavirus crisis. "Today is the time to make it clear that the EU is ready to use all available policy options - if and when they are necessary - to protect our growth from the risks of the downturn," said EU Economic Commissioner Paolo Gentiloni in Brussels. The situation is more difficult than a few weeks ago. It could also prove too optimistic to assume a rapid economic recovery.
Countermeasures by individual EU countries would be examined benevolently, added Gentiloni. He also referred to Italy's announcement that it would launch a multi-billion stimulus package despite high levels of debt. The Italian government is planning an aid package for the economy additionally impacted by the coronavirus outbreak in the amount of EUR 3.6 billion.
The OECD expert also sees central banks as a duty. However, it is questionable how far monetary policy support can help in the Corona crisis. Because the main problem does not lie in the financial system, but in the real economy: Because large parts of the economy in China stand still and the virus spreads to other countries, the international production and supply chains are disrupted. Nevertheless, the major central banks are trying to counter the nervous mood on the markets.
After the US Federal Reserve signaled its willingness to act on monetary policy on Friday, the central banks of Great Britain and Japan followed suit on Monday. The European Central Bank (ECB) was more cautious: France's central bank chief Francois Villeroy de Galhau said that one was vigilant and prepared, but should not lose his cool.
There are calls for more international cooperation. The OECD suggests a joint message from the G20 Club, which unites large industrialized and emerging countries. The aim should be to create more trust - this is indeed necessary, because the stock markets had plummeted last week.
"Just as the EU health ministers coordinate closely these days, EU economics and finance ministers must do the same," says Michael Theurer, FDP vice-group leader in Berlin. The largest economy in the eurozone has an interest in this, because the "corona crisis hits Germany in an economically difficult phase," summarizes the parliamentarian.
Communication from the OECD