The International Monetary Fund (IMF) expects a modest improvement in the global economy in 2020 and 2021 despite the significant dislocations already being caused in China and elsewhere by the raging Covid-19 epidemic that began in China in December 2019.
On Sunday, Managing Director Kristalina Georgieva told the Group of 20 (G20) finance ministers and central bank heads that met in Saudi Arabia the Covid-19 epidemic will cut 0.1 percentage points off global growth.
Georgieva said the IMF in January projected global growth improving to 3.3% in 2020 from 2.9% in 2019. Since this prediction was made, however, Covid-19 has further disrupted business and economic activity in China and has spread faster in Europe and the Middle East.
The disease has spread quickly in Italy, South Korea, and Iran over the past week and it now threatening economic activities in these countries. South Korea raised its infectious disease alert to its highest level Sunday. The European Union sees "no need to panic" over an outbreak in Italy.
"We will enhance global risk monitoring, including of the recent outbreak of Covid-19. We stand ready to take further action to address these risks" said a statement from the finance ministers and central bank heads.
"Global growth is expected to pick up modestly in 2020 and 2021. The recovery is supported by the continuation of accommodative financial conditions and some signs of easing trade tensions."
Saudi Finance Minister Mohammed al-Jadaan said the leaders discussed the Covid-19 outbreak in China and other countries and all the G20 countries agreed collectively on being ready to intervene with necessary policies.
For her part, Georgieva said the banks believe that if the current baseline scenario and announced policies are implemented, China's economy might return to normal in the second quarter.
"As a result, the impact on the world economy would be relatively minor and short-lived," she noted. "But we are also looking at direr scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted," she added.
She also pointed out China is doing all it can to counteract the economic damage being inflicted by Covid-19.
"The Chinese authorities are working to mitigate the negative impact on the economy, with crisis measures, liquidity provision, fiscal measures, and financial support," according to Georgieva. "I have had an excellent discussion with Governor Yi Gang and other senior officials and assured them of our support for these policy measures."
Yi has been Governor of the People's Bank of China (PBOC), the country's central bank, since 2018. He's also Deputy Director of the Financial Stability and Development Committee of the State Council.
