The covid-19 pandemic, as it is now officially categorized, poses a severe threat to global growth. The Economist Intelligence Unit now expects global growth of 1.9% this year—the slowest rate since the global financial crisis. The negative effect on growth will come via both demand and supply channels. On the one hand, quarantine measures, illness, and negative consumer and business sentiment will suppress demand. At the same time, the closure of some factories and disruption to supply chains will create supply bottlenecks.
The realization that global GDP will probably shrink for part of the year has led to a flurry of policy responses from governments and central banks. The US Federal Reserve has dramatically cut the lending rates to near zero and the Bank of England has also made emergency cut of 0.5 percentage points. The European Central Bank and the Bank of Japan are likely to follow suit, although with rates at or near zero already both are somewhat constrained.
In Asia governments have already enacted support and stimulus measures including straight cash handouts (Hong Kong), cash-flow support to retain and retrain workers (Singapore) and easing compliance measures for SMEs (China).
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Network Director, Shanghai of The Economist Corporate Network
Chief Economist at Natixis
Director, Corporate Network, North Asia of The Economist Corporate Network
Director, South-east Asia of Economist Corporate Network
Global Editorial Director of Economist Corporate Network