The coronavirus outbreak could tip much of Europe into recession and cut global growth in half this year, economists have warned.
The Organisation for Economic Co-operation and Development (OECD) said the euro area, which includes some of Europe’s biggest economies, could enter a contraction within months.
Global growth may be as low as 1.5 per cent this year, down from the 2.9 per cent previously forecast, the OECD said on Monday.
The think tank, which represents 36 wealthy countries, said Japan may also be tipped into recession.
It warned that the Covid-19 virus presented the gravest threat to global economic growth since the financial crisis.
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Visitors with suspected symptoms of the new coronavirus, inside of a car, bottom right, get virus test by members of medical team as others queue in their cars at a “drive-through” test facility at Yeungnam University Medical Center in Daegu on 27 February 2020
AP
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Workers move equipment into containers set up as a makeshift medical facility to accommodate COVID-19 patients at a hospital’s grounds in Daegu, South Korea on Friday 28 February 2020
AP
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People wait in line to buy face masks in front of a store at Dongseongro shopping district in Daegu on 27 February 2020
AFP via Getty Images
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Medical workers wearing protective gears comfort each other outside a hospital in Daegu, South Korea, on 28 February 2020
REUTERS
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Medical staff in protective gears arrive for a duty shift at Dongsan Hospital in Daegu South Korea on Friday 28 February 2020
AP
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A South Korean health worker sprays disinfectant as part of preventive measures against the spread of the COVID-19 coronavirus, at a residential area near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A man wears a mask and goggles as he waits in line to buy face masks from a post office near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty
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South Korean medical workers wearing protective gear visit a residence of people with suspected symptoms of the COVID-19 coronavirus to take samples, near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A South Korean health worker sprays disinfectant as part of preventive measures against the spread of the COVID-19 coronavirus, at a residential area near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A South Korean army vehicle sprays disinfectant on a road to prevent the spread of the COVID-19 in Daegu, South Korea on Thursday 27 February 2020.
AP
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Troops set up makeshift partitions and beds at the Armed Forces Hospital in Daegu South Korea 28 February 2020
EPA
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Visitors with suspected symptoms of the new coronavirus, inside of a car, bottom right, get virus test by members of medical team as others queue in their cars at a “drive-through” test facility at Yeungnam University Medical Center in Daegu on 27 February 2020
AP
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Workers move equipment into containers set up as a makeshift medical facility to accommodate COVID-19 patients at a hospital’s grounds in Daegu, South Korea on Friday 28 February 2020
AP
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People wait in line to buy face masks in front of a store at Dongseongro shopping district in Daegu on 27 February 2020
AFP via Getty Images
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Medical workers wearing protective gears comfort each other outside a hospital in Daegu, South Korea, on 28 February 2020
REUTERS
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Medical staff in protective gears arrive for a duty shift at Dongsan Hospital in Daegu South Korea on Friday 28 February 2020
AP
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A South Korean health worker sprays disinfectant as part of preventive measures against the spread of the COVID-19 coronavirus, at a residential area near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A man wears a mask and goggles as he waits in line to buy face masks from a post office near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty
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South Korean medical workers wearing protective gear visit a residence of people with suspected symptoms of the COVID-19 coronavirus to take samples, near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A South Korean health worker sprays disinfectant as part of preventive measures against the spread of the COVID-19 coronavirus, at a residential area near the Daegu branch of the Shincheonji Church of Jesus in Daegu on 27 February 2020
AFP via Getty Images
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A South Korean army vehicle sprays disinfectant on a road to prevent the spread of the COVID-19 in Daegu, South Korea on Thursday 27 February 2020.
AP
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Troops set up makeshift partitions and beds at the Armed Forces Hospital in Daegu South Korea 28 February 2020
EPA
China’s economy will slow down sharply to less than 5 per cent growth this year from 6.1 per cent in 2019, according to the OECD.
“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions,” said OECD chief economist Laurence Boone.
“Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected.”
To mitigate the economic fallout, employees should be allowed to work from home, the OECD said. It urged governments to step in to support sectors most affected such as travel and tourism, and the car and electronics industries.
It also called for central banks to provide extra liquidity to banks to that they can help businesses suffering immediate cash-flow problems.
If the epidemic spreads widely, the G20 economies should lead an internationally co-ordinated framework for health care support, combined with co-ordinated fiscal and monetary stimulus to rebuild confidence, the OECD’s report said.
Amid trade tensions and political uncertainty, Europe and Japan were already growing slowly before the new coronavirus began to spread.
The prospect of a pandemic sparked a rapid sell-off on stock markets around the globe last week as investors weighed up the impact of factory shutdowns, cancelled flights and disruption to the supply of goods.
The FTSE 100 regained some of the lost ground on Monday morning, trading 1 per cent up on Friday’s close.
