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Worldwide spread of COVID-19 hits global economy while positive signs in China boost confidence

Editor: Zhang Jianfeng 丨Xinhua

03-08-2020 10:31 BJT

Full coverage: China fights against novel coronavirus

IMF forecasts global growth in 2020 would drop below last year's level of 2.9 percent. China brings hope of recovery with a "good sign for the global economy."

BEIJING, March 7 -- As the number of COVID-19 confirmed cases worldwide has reached over 100,000, the world's major economies including the United States, Europe and South Korea have felt the resulting impact on their markets.

Meanwhile, positive developments such as a nationwide return to work and resumption of production in China bring hope of recovery, which, as some experts said, is a "good sign for the global economy."

On Friday, U.S. stocks ended lower as the market sell-off continued amid concerns of slower economic growth. The German DAX index continued to fall and has so far decreased by more than 13 percent within the last two weeks.

The International Monetary Fund (IMF) forecasts global growth in 2020 would drop below last year's level of 2.9 percent on Wednesday. In February, the IMF already revised down 2020 global growth to 3.2 percent.

Europe's leading economy Germany saw a rising number of infected people this week as the Federation of German Industries warned that "the coronavirus and its worldwide distribution currently has the greatest negative impact on the economic development in Germany."

Supply chains were already at risk and "major problems would be inevitable," said Germany's Institute for Economic Research.

However, major economies, especially those hit hard by the disease, have rolled out economic stimulus in response.

South Korea with the most COVID-19 cases outside China has unveiled 9.8 billion U.S. dollars' worth as part of an extra budget on Wednesday to boost private consumption, which was the country's biggest extra budget in seven years.

The supplementary budget bill came hours after the U.S. Federal Reserve cut its target rate by 50 basis points in its first emergency move since the 2008 global financial crisis.

Italy, the European country with the most COVID-19 infections, passed an emergency package worth about 1 billion dollars to support companies and households in the 11 towns put under quarantine in northern Italy.

The measures included the suspension of some payments and delays in taxes and house mortgages. On Thursday, the Italian cabinet announced a second and broader package of financial stimulus.

Furthermore, what is happening in China, including the restarting of roughly 60 percent of production in the country and supportive measures to help foreign trade enterprises, is appreciated by foreign industry leaders and economic experts.

Commending the Chinese government's measures in response to the epidemic, especially those taken by the Ministry of Commerce to assist foreign companies, Richard Burn, Britain's HM Trade Commissioner for China, said, "these assistance policies apply to domestic and foreign enterprises alike, providing a strong guarantee for British companies to overcome difficulties."

The economic effect of the epidemic both for China and other countries which do business with China would be transitory, CEO of Turkey's industrial conglomerate Ciner Group Gursel Usta has said.

Usta said that China has developed a strong industry, particularly in chemistry and engineering, and he is confident about future cooperation with his Chinese partners.

China's technological prowess has aided the country's efforts to contain the spread of COVID-19, said Po Chun Lee, a professor of public economic policy at Ecuador's National Institute of Higher Studies.

Calling the resuming activity of China's offices and factories since February "a good sign for the global economy," Lee said as the world's second largest economy, China's COVID-19 battle is bound to have a wider impact, particularly on global production chains, tourism and stock markets.

Singapore Business Federation chairman Teo Siong Seng also expressed his confidence in Singapore-China trade relations despite the COVID-19 outbreak, saying their trade relations will remain strong and robust.

Citing positive developments in fighting the novel coronavirus in China, U.S. macroeconomic research body MRB Partners said that in their view, investors "will conclude that while the immediate impact on Q1 and possibly Q2 is negative, there is no risk of global recession in 2020."

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