Virus-battered world economy to shrink 3pc

The global economy is expected to shrink by 3 percent during 2020 in a stunning coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said yesterday.

China, where the coronavirus outbreak peaked in the first quarter and business activity is resuming with the help of large fiscal and monetary stimulus, will maintain positive growth of 1.2 percent in 2020, a reduction from 6 percent growth in the IMF's January forecast.

Meanwhile, advanced economies will shrink about 35 percent this quarter from the previous three months. That would be four times as much as the record set in 2008 during the financial crisis, annualized figures from Goldman Sachs show.

How fast economies will rebound is an open question because nobody knows how quickly people can get back to work, New York-based economist Jan Hatzius wrote in a note to clients.

In the United States, a steep economic downturn and massive coronavirus rescue spending will nearly quadruple the fiscal 2020 US budget deficit to US$3.8 trillion (HK$29.5 trillion) - a staggering 18.7 percent of US economic output - the Committee for a Responsible Federal Budget said.

That came as the IMF said on Monday it would provide immediate debt relief to 25 member countries under its Catastrophe Containment and Relief Trust to allow them to focus more financial resources on fighting the Covid-19 pandemic.

The announcement in the countdown to spring meetings of the IMF and World Bank on Friday.

In Europe, the French government said the economy was expected to contract 8 percent this year.

And Australia's jobless rate will soar to 10 percent in the quarter to end-June from 5.1 percent in February, treasurer Josh Frydenberg said yesterday.

In the gold market, prices rose to their highest in more than seven years. Spot gold was up 0.3 percent to US$1,719.84 per ounce by the early evening having touched its highest since November 2012.

In the oil market, Brent futures fell 8 cents, or 0.3 percent, to US$31.6 a barrel after settling at 0.8 percent up on Monday.