Concerns about the financial toll of the coronavirus pandemic continued to grow as the number of infections globally topped 600,000 Saturday, with the International Monetary Fund warning of an economic and financial crisis exceeding that of a decade ago.
Overlapping travel bans and lockdowns have hammered businesses and led to millions of job losses, punctuated by a spike in U.S. unemployment claims to more than three million this week and a warning of a deep recession this year in trade bellwether Singapore.
"It is now clear that we have entered a recession as bad or worse than in 2009," Kristalina Georgieva, managing director of the IMF, said Friday. Rising bankruptcies and layoffs could undermine any recovery and do long-lasting damage to the world economy, she said.
The risks have added urgency for countries around the world to extend relief packages to ease financial distress.
U.S. President Donald Trump on Friday signed a $2 trillion stimulus plan, the largest economic relief package in history.
With the pneumonia-causing virus spreading across the U.S. and Europe, after it was first detected in central China three months ago, governments around the world have ramped up efforts to limit people's movement and began imposing wide-ranging closures on businesses, restaurants and schools domestically in recent weeks.
Increasingly strict travel bans set up by large countries including the U.S. and China have put a dent in global commerce, complicating efforts to reignite growth.
France and Belgium on Friday extended their national lockdowns by two weeks, until mid-April. French Prime Minister Édouard Philippe said experts advising the government recommended the lockdown remain for at least six weeks. Russia on Friday suspended all passenger flights to and from the country.
The U.S. added more than 15,000 cases of the Covid-19 disease, pushing the total past 104,000 on Saturday, with a surge of cases in New York and increased testing. The growth outstripped that of Italy and China, the countries with the second and third most infections, where confirmed cases stayed around 86,000 and 81,000 respectively, according to data compiled by Johns Hopkins University.
As a result, the number of confirmed infections globally has more than doubled over the past week to more than 600,000. The death toll from the pathogen rose to more than 28,000 on Saturday, with roughly one-third of the fatalities in Italy, data from Johns Hopkins showed.
Italy's death toll from the virus on Friday rose by 919 to 9,134, the highest daily tally on record. Total infections rose to 86,498, a 7% increase from the previous day.
The IMF warned that low-income countries will be hit particularly hard given a combination of a health crisis, sudden reversal of capital flows and in some cases a plunge in commodity prices. In Russia, where oil exports account for roughly one-third of government revenue, the ruble has fallen to its lowest level in four years. The IMF estimated that at least $2.5 trillion is needed to contain economic contraction for emerging markets.
The Chinese government is also wrestling with the economic blow from the SARS-like virus, first from a prolonged halt in domestic business activities and now from weaker consumer sentiment and shrinking export demand as the coronavirus engulfs Europe and the U.S.
On Friday, the country's top decision-making body said the government plans to boost spending by increasing its fiscal deficit this year, as well as speed up issuance of Treasury bonds and so-called local government special-purpose bonds to support funding of infrastructure projects, as part of the stimulus measures to curtail economic impact from the pandemic.
"The fiscal policy needs to be more proactive, and the prudent monetary policy needs to be more flexible," said a statement from Friday's meeting of the Politburo Standing Committee, chaired by President Xi Jinping. The government also called for a gradual reopening of shopping malls and markets to boost consumer spending.
Lu Ting, an economist with Nomura, estimated that, over the second and possibly third quarters, China's exports could contract by a total of 30% from a year earlier, wiping out 18 million jobs, or about a third of those tied to trade. To counter the negative impact from the outbreak, Beijing is likely to cut its benchmark deposit rate as well as raise the fiscal deficit target to 3.5% of GDP, up from 2.8% in 2019, he wrote in a research note on Saturday.
China's National Health Commission reported 54 new infections Friday, saying all were imported from abroad, bringing the total to 81,394.
Other countries continue to tighten rules on social distancing. Iran this week closed shopping centers and banned road travel between cities, pledging to fine and impound the cars of offenders. Iranian officials have warned the population to brace for a second wave of infections. Afghanistan on Friday expanded restrictions by announcing a three-week lockdown on its capital, Kabul. Lebanon, which extended its nationwide lockdown until April 12, on Friday imposed a nighttime curfew.
In Turkey, President Recep Tayyip Erdogan introduced further travel restrictions this weekend to combat the spread of the virus, which has infected 5,698 people and killed 92 in the country, according to a tally by national health authorities. Intercity bus and air traffic will be reduced to a minimum while all international flights will be suspended.
Hong Kong banned public gatherings of four or more people beginning midnight Sunday, with those violating the rules facing fines of more than $3,000 and six months in jail. Singapore said it would fine people who violate its social distancing rules up to about $7,000.
Australia said it would quarantine citizens returning from overseas in hotels for 14 days beginning midnight Saturday.
Economist Stephen Roach believes the country is sinking into an unprecedented recession.
Roach, who’s former chairman of Morgan Stanley Asia, warns the coronavirus is spiraling the United States into a downturn that’ll be difficult to exit.
“This is a sudden stop in the U.S. economy. The hope is we’ll get through this. But it’s at least two quarters of the sharpest declines we’ve seen since the end of World War II,” the Yale University senior fellow told CNBC’s “Trading Nation” on Monday.
Roach expects the coronavirus pandemic will eventually be resolved. However, he contends a spontaneous regeneration of animal spirits is not in the cards.
‘Recovery is going to be extremely tentative’ “This is not your garden variety business cycle where a sharp downturn is followed by an equally sharp snapback,” he said. “We can restart production, but can we really restart consumption with people still scared and unwilling to go out and socialize and spend? So, I think the recovery is going to be extremely tentative.”
According to Roach, a drop-off in consumption will be exacerbated by spiking unemployment.
“The longer that the damage is done to small and medium-sized businesses, the harder they’re going to find it to re-create their old business models and rehire in a way you would expect them to do in a normal business cycle recession,” he added.
Roach, who was in China during the deadly 2003 SARS epidemic, told “Trading Nation” in late Januarythat investors should be vigilant and warned the coronavirus outbreak could cause a global economic shock. At that point, there were about 4,500 confirmed cases in China and 106 deaths from the infection.
There are now more than 750,000 coronavirus cases globally. In the U.S., there are more than 150,000 infections. The death toll grows every day.
“China clearly did draconian quarantine containments and restrictions on travel,” Roach said. “The tracking data that I see in terms of consumption still remains sharply depressed. So, even under the Chinese template, the recovery is still a very iffy one.”
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