Sharp economic slowdown expected to happen even in best-case scenario

Further fallout from the novel coronavirus outbreak could cut global growth to as low as 1.5 percent this year, almost half the figure predicted last November, the Organization for Economic Cooperation and Development, or OECD, has warned.

According to the OECD's latest Interim Economic Outlook, the diseases caused by novel coronavirus, or COVID-19 as it is also known, presents the "gravest threat" to the global economy since the 2008 financial crisis.

On Monday the Paris-based group, an intergovernmental economic organization with 36 member countries, urged governments around the world to "act immediately" to limit the spread of the virus and protect people and businesses, and "shore up demand in the economy".

"Output contractions in China are being felt around the world, reflecting the key and rising role China has in global supply chains, travel and commodity markets," the report said.

Containment measures would hit production and spending which could push some countries, including Japan and the eurozone, into recession, the group said.

The OECD believes that even under the best-case scenario of limited outbreaks in countries outside China, a sharp slowdown in world growth is expected.

"Even if the peak of the outbreak proves short-lived, with a gradual recovery in output and demand over the next few months, it will still exert a substantial drag on global growth in 2020," the report said.

Annual global GDP growth is expected to fall to 2.4 percent in 2020 from an already weak 2.9 percent in 2019. The group said the global economy could recover to 3.3 percent in 2021.

However, if the virus spreads widely throughout the Asia-Pacific region, Europe and North America global growth could drop to 1.5 percent this year.

Laurence Boone, OECD chief economist said: "The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions. Governments need to act immediately to contain the epidemic, support the healthcare system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected."

If the epidemic spreads widely, the G20 economies should lead an internationally co-ordinated framework for healthcare support, combined with co-ordinated fiscal and monetary stimulus to rebuild confidence, added the OECD.