Tuesday 3 March 2020 1:23 pm

G7 ‘ready to act’ to minimise economic impact of coronavirus

Finance ministers and central bank governors from the G7 nations have said they are “ready to act” to minimise the impact of the coronavirus outbreak, pledging to use “all appropriate policy tools” including fiscal measures. 

Following a conference call earlier today, the G7 issued a statement saying that action would be taken by each member state individually, but did not outline any specific measures that would be adopted. 

“Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks,” the statement said. 

“Alongside strengthening efforts to expand health services, G-7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase,” it continued, 

The decision to hold the call, which was led by US treasury secretary Steve Mnuchin and Federal Reserve chair Jerome Powell, came after the European Central Bank yesterday signalled a readiness to deal with the economic threat posed by the Covid-19 epidemic. 

ECB president Christine Lagarde said yesterday that the bank was ready to take “appropriate and targeted” measures over the outbreak. 

Although the G7’s stance is likely to reassure some investors who had been hoping the group would mention fiscal stimulus, the statement will come as a disappointment to those who were expecting concrete measures to be announced. 

Expectations of a coordinated policy response to coronavirus from developed economies had risen in recent days, but it had been reported earlier today that the group was planning to stop short of announcing specific measures. 

Capital Economics’ Jennifer McKeown said the statement “falls short of hopes of a coordinated policy response and raises the risk that central banks will disappoint markets’ expectations in the months ahead”.

“This is a disappointment compared to previous hopes of an immediate and coordinated fiscal package and interest rate cuts, although such hopes had already been dampened by information leaked… early this morning,” she added.