MUNICH – The International Monetary Fund hopes governments and central banks will work on a response to the coronavirus outbreak once the economic impact becomes clear, IMF Managing Director Kristalina Georgieva said on Friday.
Speaking at the Munich Security Conference, Georgieva said the next few weeks would be crucial to build up a “bottom-up” picture of the impact of the virus in China and worldwide.
“So then we can agree on synchronized, or even better, coordinated measures to protect the world economy from a more serious shock,” Georgieva told delegates.
“Can we do it? Yes. Are we going to do it? I actually think that we will.”
The coronavirus outbreak has killed more than 1,100 people and infected more than 44,000 in China after it first emerged in Wuhan, Hubei province, late last year.
China’s economy is struggling to get going after the annual Lunar New Year holiday, which was extended for 10 days to help contain the outbreak of the new and highly contagious respiratory virus, officially called 2019-nCov.
Georgieva warned against trying to make accurate predictions now because of a lack of information and said experts forecasting the economic impact were taking a risk.
Her main concern was a containment of the epidemic that led to an economic recovery but then was followed by another outbreak of the virus.
“We are looking at data very carefully … we have to do what people in rapid response do: pray for the best and prepare for the worst,” Georgieva said.
Meanwhile, the coronavirus epidemic could be a drag on the US economy this quarter, Cleveland Federal Reserve Bank President Loretta Mester said on Friday.
“I expect that, certainly in China and perhaps in Asia, the first quarter numbers are going to be weaker; there could be spillover to the US economy as well in the first quarter and it remains to be seen by how much and for how long that will persist,” Mester told Bloomberg Television.
“But in general I am seeing that as a risk to my forecast – I haven’t marked down my forecast.”
Fed policymakers have signaled they expect to keep short-term interest rates steady, within a range of 1.5 percent to 1.75 percent, for the foreseeable future. Unemployment is at 3.6 percent, inflation is expected to move back up to the Fed’s 2 percent target, and job creation continues.
The data show the US economy is in a “good place,” Mester said, using a favorite phrase of Fed policymakers.
Several Fed officials, including Chair Jerome Powell, have also said they expect to see some impact on the US economy from the coronavirus.
They have not, however, signaled expectations that the impact would lead to a “material change” to the outlook, the bar they have set for any further adjustment to rates.— Reuters
