G7 Q4 Growth Rate 0% Last Year... "Global Growth Engine Has Stalled"

[Asia Economy Reporter Naju-seok] The Gross Domestic Product (GDP) growth rate of the Group of Seven (G7) countries recorded 0% for the first time in seven years. Concerns have grown that the global economy, already weakened by the US-China trade war, could be further contracted by the novel coronavirus disease (COVID-19).

According to the Organisation for Economic Co-operation and Development (OECD) on the 20th (local time), the G7 countries (United States, Japan, Canada, France, Germany, Italy, and the United Kingdom) recorded a GDP growth rate of 0% in the fourth quarter of last year compared to the previous quarter. This 0% growth rate for the G7 is the first since the fourth quarter of 2012. The overall growth rate for all OECD countries was 0.2%, also the lowest level since the fourth quarter of 2012. This indicates a rapid shutdown of the global growth engine.

Among the G7, only the US economy showed growth at 0.5%, while other major countries such as Japan (-1.6%), Italy (-0.1%), and France (-0.1%) experienced negative growth or stagnation. The UK and Germany, which had shown growth until the previous quarter, recorded a 0% GDP growth rate in the fourth quarter.

The biggest cause of the economic downturn in the fourth quarter was the aftermath of the US-China trade war. However, Japan, which had the largest negative growth, was adversely affected by factors such as the increase in consumption tax rates, which led to a decrease in personal consumption.

The problem is that the growth rate in the first quarter of this year is likely to worsen further. Early this year, the US and China entered a truce through a Phase One trade agreement, raising hopes for a global economic recovery, but the situation rapidly reversed due to COVID-19. The coronavirus, which originated in China at the end of last year, has spread worldwide, becoming a new threat to the global economy. The UK-based economic analysis firm Oxford Economics predicted that if COVID-19 develops into a global pandemic, the global GDP could decrease by 1.3%, equivalent to $1.1 trillion (approximately 1,324 trillion KRW). Even if the outbreak is limited to the Asian region, GDP is expected to decline by 0.5% ($400 billion).

As COVID-19 casts a shadow over the global economy, the world economy has entered a state of zero visibility. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), said, "We still hope for a V-shaped recovery from the shock caused by COVID-19," but also noted, "We cannot rule out the possibility of a U-shaped recovery, where economic damage persists for some time." A senior US Treasury official stated, "It is difficult to predict the extent of the future shock, but we believe the Chinese economy is likely to rebound soon after a sharp decline in the first quarter," adding, "If the situation worsens, the economic damage will be greater."

The truce in the US-China trade war has also become precarious. According to the Phase One agreement, China is required to purchase $200 billion worth of US products and services over the next two years. However, due to the severe impact of COVID-19 on the Chinese economy, there are calls within China to delay the implementation of the agreement. On the other hand, a senior US Treasury official demanded compliance, stating on the same day, "We expect China to fulfill the terms of the agreement."

This content was produced with the assistance of AI translation services.