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Citing the economic impact of the coronavirus outbreak, the IIF
lowered its forecast for U.S. growth this year to 1.3%, down
from 2% previously, with the epicenter of weakness in the second
quarter, and China to just shy of 4% from 5.9% previously.
Global growth in 2020 could conceivably approach 1%, far below
the 2.6% expansion in 2019 and the weakest since the financial
crisis, the IIF said.
"The range of potential outcomes is large and depends on the
spread of the virus and resulting economic fall-out, all of
which are highly uncertain at this stage," IIF economists said
in a report.
Aside from the world's two largest economies, IIF cited
vulnerabilities in Germany, Japan and emerging markets.
In an emergency move to shield the U.S. economy from the impact
of the outbreak, the U.S. central bank on Tuesday cut rates by a
half percentage point to a target range of 1.00% to 1.25%.
The Federal Reserve's move was an opportunity to cut rates for
those emerging market central banks which had so far held off
out of concern their currencies may weaken, IIF said.
That was especially important in high carry, low growth
countries like Mexico and South Africa and more broadly across
emerging markets where growth has been weak, it added.
"Such a de facto easing cycle would help bring growth to EM and
buffer the global economy from COVID-19," IIF said.
(Reporting by Tom Arnold; Editing by Alexander Smith and Chizu
Nomiyama)
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