OECD says prolonged coronavirus could halve growth

The OECD has raised the prospect of the coronavirus halving the rate of global economic growth this year.

Under what the OECD called the "domino" prospect of widespread contagion, which would involve recession in Japan and in the eurozone, growth could be 1.5pc in 2020, compared with the 2.9pc it projected before the coronavirus outbreak.

Under the OECD's base case for a "temporary blow" — a severe, short-lived downturn followed by a gradual recovery in China, Japan, South Korea and Australia with a much less pointed effect in the rest of the world — it expects global economic growth at 2.4pc this year, down from 2.9pc in 2019.

Whichever case transpires, the OECD said governments must "act immediately" to limit the coronavirus' spread, protect people and businesses from its effects and shore up demand in the economy. It said measures should include temporary tax and budget moves and the provision of additional liquidity into the banking system.

The knock-on effects of the coronavirus outbreak on the energy markets are rippling out from Asia-Pacific in much the same way as the virus itself, and last week the World Health Organisation raised its risk assessment for coronavirus to "very high at a global level". Global stock markets experienced their biggest weekly falls since the financial crisis of 2008 last week as fears grew about the disease's potential economic impact. Crude prices are down by between a fifth and a quarter from early January and product prices have fallen even faster, hitting refining margins.

But, front-month Ice Brent crude appeared to have found a floor around $50/bl this morning, with Opec appearing willing to go ahead with its meeting in Vienna this week. It will decide there how to respond to the prospect of a deepening hit to oil demand.

By Ben Winkley