It said global growth had already slipped to 2.8 per cent annualised through the December quarter, from 3.1 per cent in the September quarter.
With measures to contain the virus across China weighing on economic activity and other countries putting in place their own restrictions, Capital Economics believes global GDP will shrink by 1 per cent annualised through the start of 2020.
It would be the first global economic contraction since the first quarter of 2009, which was during the depths of the GFC.
“The new coronavirus has reshaped the global economic outlook for at least the next couple of quarters,” they said. “From what data are available, it looks like the hit has been big enough for global GDP to contract this quarter.
“So, where the eurozone crisis, China hard-landing fears, the Fed’s botched tightening cycle and the trade war failed to bring the world economy’s growth streak to an end, the coronavirus looks set to succeed.”
The IEA said in a report on Friday global demand for oil would fall through the first three months of the year because of the virus outbreak, the first quarterly drop since the GFC.
It cut its forecast for crude oil refined in China by a million barrels a day through the March quarter, to be half a million barrels a day down on the same period last year.
“The consequences of COVID-19 [coronavirus] for global oil demand will be significant,” it said.
The tourism market is also continuing to suffer from the virus fallout.
Royal Caribbean Cruises announced on Friday it was cancelling 18 planned cruises across South-East Asia because of the virus. Fellow cruise company Carnival Corp this week confirmed it was suspending operations in China.
AMP Capital chief economist Shane Oliver said the coronavirus and the summer’s bushfires would probably deduct 0.6 percentage points from growth through the March quarter. This would leave Australia with quarterly growth of minus 0.1 per cent.
NAB economists said the virus would lead to a “major shift down” in global growth, with much of that concentrated in east Asia.
They also believe global growth in the March quarter will be its weakest since the GFC. China GDP alone is tipped to be flat through the first three months of 2020 after a 1.5 per cent rise in the final three months of 2019.
“This outlook is predicated on a relatively short (single-quarter) disruption in activity followed by a recovery in the second quarter; a ‘best-case’ scenario,” the NAB economists said.
Both NAB and AMP believe there will be an economic bounceback through the second half of 2020 if the virus is contained relatively quickly. But global growth will still be lower through the full year because of the virus.
UBS chief economist George Tharenou, who expects Australian economic output to shrink through the March quarter, said the Reserve Bank of Australia would be forced into action.
He said China accounted for 35 per cent of Australia’s exports and almost 9 per cent of GDP, making Australia one of the most exposed countries in the world to the virus outbreak.
“We retain our view the starting point for the economy keeps getting materially worse and more policy stimulus is needed,” he said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
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