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Coronavirus and the Global Economy

If developing countries’ health systems come under pressure, the US, Europe, and others should step up quickly with technical assistance and essential supplies. Unfortunately, there has so far been a worrying lack of leadership especially by US President Donald Trump's administration.

WASHINGTON, DC – The emergence of COVID-19, a new coronavirus, is a tragic public-health emergency. The disease, one hopes, will be brought under control quickly, but the International Monetary Fund is already warning that economic growth in China may slow. As we watch the situation unfold, three broader risks to the global economy are also becoming more apparent.

The first risk is obviously in China itself. While the precise origins of the disease remain unclear, it is hard to take a definite view on whether outbreaks of this kind could be avoided – for example, by better control over hygiene in food markets. But it is painfully obvious that a lack of transparency in China has contributed to fear and even signs of panic around the world.

As financial markets demonstrated in 2007-2008, when the precise incidence of big risks is not well understood, people tend to assume the worst. Rapidly falling asset prices may not contain much information – except that there is not much information to be had.

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