Economists: Virus may shrink world economy

PARIS — A global agency says the spreading new virus could make the world economy shrink this quarter for the first time since the international financial crisis more than a decade ago.

In a special report on the effect of the virus, the Organization for Economic Cooperation and Development said Monday that the world economy is still expected to grow overall this year and rebound next year.

But the OECD 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.

In addition to the “considerable human suffering” the virus has wrought, with more than 3,000 deaths worldwide, the OECD said “Global economic prospects remain subdued and very uncertain.”

The last time the world economy shrank on a quarter-on-quarter basis was at the end of 2008, when a shock to the financial sector caused turmoil for businesses around the world and mass layoffs. On a full-year basis, it last shrank in 2009.

The OECD said China’s reduced production is hitting Asia 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 effect 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.”

China’s viral outbreak has already disrupted global supply chains and cut business profits. And as the disease spreads, economists now worry about a graver scenario: That quarantines and greater caution among consumers will lead people to cancel travel plans, skip restaurant meals, avoid stores or stay home from work.

European Union’s markets commissioner Thierry Breton estimated Monday that the virus has cost Europe $2.2 billion this year in tourism revenue alone.