Global economy slows on back of coronavirus outbreak Global economy slows on back of coronavirus outbreak
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Global economy slows on back of coronavirus outbreak

    NHK Senior Economic Commentator /
    NHK World Special Affairs Commentator
    It's not easy to assess the economic impact of the ongoing coronavirus outbreak without knowing the full extent of the epidemic and how long it will last. But many analysts are saying that, even as things stand, the outbreak will be a major setback for the global economy.

    To start, here are some basic facts about the Chinese economy:

    The GDP of Wuhan, the city at the center of the epidemic, is nearly the size of that of Vietnam. The figure for Hubei Province, which Wuhan is the capital of, is larger than that of Thailand.

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    Hubei has been one of the bright spots for the Chinese economy in recent years. In 2018, the province recorded nearly an 8 percent growth rate, while the number for China as a whole was below 7 percent.

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    As such, there are few places where the effects of an outbreak would be more devastating to the Chinese economy. Analysts believe that an extended business shutdown in Hubei and neighboring areas will slow national economic growth by two percentage points.

    China has announced a number of measures to combat the effects of the virus. The People's Bank of China announced that it has injected 1.2 trillion yuan worth of liquidity into the markets in an effort to keep the country’s economy afloat. The bank is also expected to announce additional easing measures as early as this week, with further fiscal actions to follow. However, the fact that the country's medical officials have been unable to contain the spread of the outbreak will dampen the effects of any measures to boost the economy.

    The virus is also dealing a heavy blow to Japan. The country has been struggling to recover from the effects of a consumption tax hike last fall, which caused the GDP growth rate for the October to December period to fall to minus 6.3 percent. If this continues through the January to March period, the country may technically fall into a recession. The outbreak is already devastating the tourism and auto industries, which are heavily reliant on China.

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    The effects of the outbreak aren't just limited to Asia; they are quickly spreading around the world. German, French, and US automakers have been forced to shutter operations in Wuhan. Crude prices have been plummeting due to declining demand from China, hurting oil-producing countries.

    The International Monetary Fund projected the global economy to grow 3.3 percent this year. But it may downgrade this forecast due to the outbreak.

    Finance ministers and central bankers from 20 major economies will gather in Saudi Arabia this weekend to discuss the economic challenges posed by the outbreak. The meeting will test how transparent and cooperative the countries can be to tackle a growing health and economic emergency.