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Calm plea: Michael O’Leary

Calm plea: Michael O’Leary

Calm plea: Michael O’Leary

Governments should consider extreme measures to keep their economies pumping during the coronavirus outbreak - including extra pay and tax relief for health workers, temporary VAT cuts to keep people spending and reduced employers' taxes to prevent layoffs.

The Organisation for Economic Co-operation and Development (OECD) warned yesterday that the outbreak has plunged the world economy into its worst downturn since the global financial crisis.

Ryanair boss Michael O'Leary pleaded it was a "time for calm" as his airline slashed its services to Italy.

Meanwhile, the OECD said growth in the world economy will be half what had been expected this year, at just 2.4%, and the worst growth since 2009.

If the outbreak worsens, global growth could drop as low as 1.5% this year, the OECD warned.

The OECD, which advises rich countries on policy, says governments and central banks should stimulate demand to avoid an even steeper slump and even a recession.

OECD chief economist Laurence Boone said that governments needed to support health systems with extra pay or tax relief for workers doing overtime and short-time working schemes for companies struggling with a slump in demand.

Governments could give companies further financial relief by cutting social charges, suspending value-added taxes and providing emergency loans for sectors hit particularly hard, such as travel, Ms Boone said.

"We don't want to add a financial crisis to the health crisis," Ms Boone said.

Global factory data for February shows the outbreak has already had a dramatic impact with US and UK manufacturing slower last month, and China suffering its sharpest slowdown ever.

Analysts at Oxford Economics launched a new weekly Coronavirus Watch bulletin.

In its first bulletin, the organisation said: "Developments over the past couple of weeks suggest that the economic disruption from coronavirus' spread will be larger, broader, and more long-lasting than we previously envisaged.

"Global GDP growth in 2020 is likely to be even weaker than the 2.3% assumed in our current baseline forecast.

"Given the gradual return to business as usual in China, we've revised down our year-on-year Chinese GDP growth forecast in Q1 again, from 3.8% to just 2.3%."

The virus had already hit visitor arrivals to tourist destinations in Asia, "and sharp falls in the business and consumer surveys in February suggest significant economic contagion".

"Sentiment in economies further from China has held up better, or risen, although this resilience is unlikely to last," Oxford Economics added.

It said that a pandemic scenario was not the most likely outcome. But it added: "The scale of Covid-19's spread outside mainland China does look set to exacerbate disruption to global supply chains.

"This, combined with the sharp financial market sell-off, has increased the risk of demand softening, resulting in a slower economic recovery when supply-side constraints eventually wane."

Oxford Economics said shutdowns in China had reduced the spread of the virus but that other indicators suggested a slower return to normal than had been assumed previously.

It said the plunge in China's official manufacturing purchasing managers index (PMI) from 50 to a record low of 35.7 clearly points to a steep fall in economic growth".

It predicted growth in China over 2020 of just 4.8%. Growth was around 6% in 2019.

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