Analysis by the IMF’s economics team shows the hardest impacts in China, the epicentre of the crisis, have fallen on services, which are less likely to benefit from a rebound or “catch-up surge” that goods makers should eventually witness.
Shipping activity has collapsed by the same amount as “the most acute phase of the global financial crisis”, its behaviour unlike in recent epidemics or after the 9/11 terrorist attacks in the US.
Supply-side impacts include disruptions to China’s supply chains into the global economy, raising business costs and delivering a “negative productivity shock”, Dr Gopinath wrote in a blog post.
On the demand side, the fear of contagion and heightened uncertainty will curb household spending.
“Workers may be laid off, as firms are unable to pay their salaries,” she said, noting the effect was likely to be particularly severe in tourism and hospitality.
The hit to airline stocks as the crisis deepens is akin to what happened after 9/11 and is more than that of the global financial crisis, Dr Gopinath warned.
Credit shocks could be another source of disruption, she warned, by amplifying any downturn caused by the breakdown of supply and demand.
“Central banks should be ready to provide ample liquidity to banks and non-bank finance companies, particularly those lending to small- and medium-sized enterprises,” she said.
Given the global effects of the epidemic “the argument for a coordinated international response is clear”.
Moody’s on Monday also joined the growing band of economic forecasters to downgrade its global outlook as the virus spreads.
Growth across Group of 20 economies, which includes Australia, will be 2.1 per cent this year, down from Moody’s previous outlook of 2.4 per cent, it warned.
“The longer it takes for households and businesses to resume normal activity, the greater the economic impact,” Moody’s analysts wrote.
Australia’s economic growth will slow to 1.6 per cent this calendar year, from an estimated 2 per cent in 2019, before accelerating to 2.6 per cent, they said.
Those numbers will be worse if the coronavirus leads to what Moody’s calls a scenario of “significant global disruption” involving subdued commodity prices that deliver exporters a sustained negative terms-of-trade shock.
GDP growth in Australia would fall to just 1.3 per cent this year under that scenario.
“The coronavirus is a global health shock, which makes it extremely difficult to provide an economic assessment,” the Moody’s team wrote.