At the January 2020 Monetary Policy Committee meeting, the synchronised slowdown in the global economy had started showing modest signs of recovery. The signing of the Phase I trade deal between the US and China, and a successful UK election in December 2019 contributed significantly to dampen the uncertain policy environment.
Though the Coronavirus (COVID-19) had emerged in China at the time of the MPC meeting in January 2020, the impact assessment was uncertain. Since then, COVID-19 has spread beyond China with devastating effects on the global economy.
In particular, COVID-19 has significantly heightened uncertainty in global financial markets, causing a sharp downturn in global stock prices and a steep rise of emerging markets’ sovereign bond spreads. These unfolding events have further worsened the pre-existing weaknesses in growth and caused major disruptions to global supply chains with adverse implications for the global economy.
Given the scale of disruptions to current economic activity, the potential adverse effects of COVID-19 on growth, along with the sharp fall in commodity prices, will weigh heavily on economic activity in emerging market and frontier economies.
