Coronavirus impact on world economy uncertain amid ‘sluggish’ growth: IMF chief

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The Chinese virus outbreak’s impact on the world economy is hard to predict because of China’s new outsized role in the global marketplace, International Monetary Fund chief Kristalina Georgieva said Wednesday.

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“We are still at the point of quite a lot of uncertainty,” Georgieva said in a video released by the IMF. “In terms of scenarios, the more most likely scenario we now view is a V-shaped impact. In other words, sharp decline in economic activities in China, followed by a rapid recovery and a total impact on China relatively contained. Therefore, impact on the world economy also contained.”

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China’s role in the world economy has changed dramatically since the SARS outbreak in the early 2000s, meaning experts can’t be sure of their predictions, Georgieva cautioned.

“Then it was 8 percent of the world economy. Now it is 19 percent and it is much more integrated in Asia and with the rest of the world. Therefore, disruptions are more likely to cascade down to other countries,” Georgieva said. “The world economy in the early 2000s was in a very strong shape, whereas today we are projecting a relatively modest global growth… 3.3 percent.”

A person wearing protective suit waits near an entrance at the Cheung Hong Estate, a public housing estate during evacuation of residents in Hong Kong Tuesday. (AP Photo/Kin Cheung)

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Georgieva said IMF will have more data “based on the restart of factories and production in China” next week.

Her remarks come after Federal Reserve Chairman Jerome Powell hinted that policymakers at the U.S. central bank are unlikely to move interest rates this year, so long as the economy remains on its current path of growth.

Powell did say the rapidly spreading coronavirus — more than 1,000  people have died from the mysterious illness, while Chinese officials confirmed more than 40,000 cases — had emerged as a new risk to the global economy. Multiple companies and countries are limiting travel to and from mainland China, evacuating citizens and scaling back operations, raising concerns about the health of the world’s second-largest economy.

Security guards hold the curtain for a cyclist to past through a disinfectant spray in order to return home at a residential complex in northern China’s Tianjin Municipality Tuesday. (Chinatopix Via AP)

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He acknowledged the virus would likely weigh on the Chinese economy, the second-largest in the world, and warned that could weigh on the broader global outlook. But he said it was ultimately “too early to say” what the effects will be.

“Some of the uncertainties around trade have diminished recently, but risks to the outlook remain,” Powell said. “In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.”

FOX Business’ Megan Henney contributed to this report.

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