The next two weeks will be crucial in determining the economic impact of the coronavirus, International Monetary Fund Managing Director Kristalina Georgieva said Friday.
In that time, factories are due to reopen in China, which would give a “better understanding on the resilience of China and on that basis, the spillover for the rest of the world,” Georgieva told CNBC’s Hadley Gamble at the Munich Security Conference.
She said the IMF was also watching how COVID-19 was spreading outside China, saying it was “not a major issue for now” but that could change if it spreads into “weak health system countries, for example in Africa.”
China’s National Health Commission on Friday reported an additional 121 deaths nationwide, with 5,090 new confirmed cases of the coronavirus.
The flu-like virus was found to have killed a total of 1,380 people in mainland China as of Thursday evening after the health commission said it had removed 108 deaths from the total figure due to a double-count in Hubei province — the epicenter of the global outbreak.
Georgieva cautioned against comparing the new coronavirus with the global outbreak of severe acute respiratory syndrome the early 2000s, which the IMF was using as a reference point.
She explained that not only was this strain of the new virus, COVID-19, different than SARS but China and the world economy had also changed. China only represented 8% of the world economy in the early 2000s and now makes up a 19% share, she pointed out.
“Therefore a spillover from China, integrated especially in Asia but also with the rest of the world is much more significant,” she said.
She added that the world economy at that time was “actually in quite good shape,” but was now more “sluggish.”
Physicians have likened it to the outbreak of SARS, which had a short incubation period of two to seven days. During the 2002-2003 period of infection for SARS, there were nearly 8,098 reported cases and 774 deaths, according to the World Health Organization. It means the virus killed roughly 1 in 10 infected people.
Georgieva credited China for taking “two very important steps” in paying a lot of attention to the areas affected by the outbreak and giving its economy a liquidity boost, along with cutting interest rates and providing stimulus to affected areas to prop up local economies.
Speaking to CNBC’s Sara Eisen on “Closing Bell” alongside Ivanka Trump on Wednesday, Georgieva said the IMF’s baseline scenario for the impact of the coronavirus on China’s economy was a “V-shaped dramatic decline and very significant recovery.”
Georgieva said the IMF was still predicting economic growth for Germany of over 1% in 2020 despite fourth-quarter figures that were published on Friday showing stagnation. The preliminary data gave an expansion of 0.4% for the final three months of 2019, down from 0.6% in the third quarter.
She argued that Germany’s decision to participate in the EU’s Green Deal, a plan to make the bloc carbon neutral by 2050, could create jobs and boost innovation.
She also said weakness in the euro and “all other things (being) equal” should increase the value of Germany’s exports, and she was waiting to see if this compensated for “all the other difficulties” the country was experiencing.
“Let’s remember if there is a country in Europe that has fiscal space, Germany is that country,” she told CNBC in Munich.
Georgieva went on to say Germany had strong fundamentals, and despite its loss in confidence because of a fall in manufacturing, it was “innovative” and had a “disciplined labor force.”
“Even if today in Munich the skies may be gray, it doesn’t mean that the future of Germany is dark,” she said.