Covid-19 could shrink world economy for first time since financial crisis

The spreading new Covid-19 virus could make the world economy shrink this quarter, for the first time since the international financial crisis more than a decade ago, experts said.

The Organisation for Economic Cooperation and Development said in a special report on the impact of the virus that the world economy is still expected to grow overall this year and rebound next year.

But it lowered its forecasts for global growth in 2020 by half a percentage point, to 2.4%, and said the figure could go as low as 1.5% if the virus lasts long and spreads widely.

The last time world GDP shrank on a quarter-on-quarter basis was at the end of 2008, during the depths of the financial crisis.

On a full-year basis, it last shrank in 2009.

The OECD said China’s reduced production is hitting Asia particularly hard but also companies around the world that depend on its goods.

It urged governments to act fast to prevent contagion and restore consumer confidence.

The Paris-based OECD, which advises developed economies on policy, said the impact of this virus is much higher than past outbreaks because “the global economy has become substantially more interconnected, and China plays a far greater role in global output, trade, tourism and commodity markets”.