Coronavirus could cause worst financial crisis for a decade, says OECD
CORONAVIRUS could cause the worst financial crisis for a decade, an international trade body has warned.
The Organization for Economic Cooperation and Development (OECD) had predicted that the global economy would grow by 2.9 per cent this year, but now it's lowered its prediction to 2.4 per cent, the lowest since 2009.
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The FTSE100 dropped by 13 per cent last week, the biggest one-week fall since the financial crisis in 2008, but this morning it finally took an upwards turn for the first time in two weeks.
It closed at 6,655, 1.13 per cent higher than Friday’s close, but the bounce-back was short lived before it plummeted more than 350 points by mid-day following the OECD's concerns.
The trade body warns that growth could slip to as low as 1.5 per cent over the year if the virus spreads throughout Asia, Europe and North America and lasts a long time.
In the worst case, it could put many countries in a recession but the trade body also said that if the pandemic is contained, then the global economy could recover to 3.3 per cent in 2021.
The Bank of England - along with the US Federal Reserve and Bank of Japan - has also assured that it is taking "all necessary steps" to protect the British economy from the impact of the deadly virus.
"The Bank continues to monitor developments and is assessing its potential impacts on the global and UK economies and financial systems," a spokesman said earlier today.
The OECD added that it hopes its downside prediction will urge governments in affected areas to act as quickly as possible to avoid a "worst case scenario".
These measures include support for health systems with extra pay or tax relief for workers doing overtime and short-term working schemes for companies struggling with a slump in demand.
Governments could relieve the impact by cutting social charges, suspending value-added taxes and providing emergency loans for sectors particularly hard, such as travel.
It added that central banks showing signs that they are ready do more if the situation gets worse will show comforting signs to stressed financial markets.
"A G20 coordinated health, fiscal and monetary policy response would not only send a strong confidence message but also multiply the effect of national actions," said Laurence Boone, from the OECD, said.
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Adrian Lowcock, from investment platform Willis Owen, said: "For investors it means putting up with a lot more volatility to come – this event is unfortunately far from over and trying call when to buy and sell in the face of such an unknown event is virtually impossible.
";While many stocks look cheap now, they could get a lot cheaper before this crisis is over."
In the UK, the number of confirmed coronavirus cases has hit 36, while Scotland has also confirmed its first case - follow our live blog for the latest.