The institute pointed to the economic impact of the outbreak of the Corona virus, to reduce its forecast for US growth this year to 1.3 percent, down from two percent previously, with weakness concentrated in the second quarter, and for China to just under four percent from 5.9 percent previously.
The institute said that global growth in 2020 may be close to one percent, which is much less than the 2.6 percent growth in 2019 and represents the weakest growth since the global financial crisis.
“The range of possible consequences is great and depends on the spread of the virus and the resulting economic consequences, all of which are very hazy at this stage,” the institute’s economists said in the report.
Outside of the world’s two largest economies, the institute points to weakness in Germany and Japan and emerging markets.
In an emergency move to protect the US economy from the impact of the outbreak, the US central bank cut interest rates on Tuesday by half a percentage point to a target range between 1 percent and 1.25 percent.
The Institute of International Finance said that the Federal Reserve’s move constituted an opportunity to reduce interest rates for central banks in emerging markets, which have refrained from taking this step so far due to fears that their currencies may decline.
He added that this was especially important for countries that offer high returns and achieve low growth, such as Mexico and South Africa, and across emerging markets in general, where growth was weak.
“This actual facilitation course would help achieve growth in emerging markets and protect the global economy from Covid-19,” the institute said.
Moataz Mohamed prepared for the Arab publication