Since the beginning of this year, the COVID-19 epidemic has spread around the world, with confirmed cases in more than 200 countries and regions. As of May 5, the cumulative number of confirmed cases has exceeded 3.7 million, and the number of deaths has exceeded 250,000. Due to the impact of the epidemic, the International Monetary Fund (IMF) has lowered its 2020 global GDP growth forecast by 6.3 percentage points from 3.3% in January to -3%, marking the worst economic recession since the "Great Depression" in the 1930s. The World Bank also slowed its 2020 GDP growth forecast for the East Asia-Pacific region to 2.1% from 5.8% in 2019.

The epidemic has had a significant impact on the global economic operation. First, countries have adopted measures such as city closures, work stoppages, and quarantines, which have basically stopped economic activities other than the production of necessities, and the economy has come to a standstill. Secondly, international trade has shrunk severely, reducing the potential growth rate of the global economy. The World Trade Organization predicts that due to the impact of the epidemic, global trade will shrink by 13% to 32% this year, which may exceed the level of the 2008 international financial crisis. The slowdown in global economic growth caused by the epidemic will further drive the decline in external demand and bring greater consequences to the foreign trade sector. pressure. Third, the short-term "shock" in most industries has affected key nodes in the global supply chain. In recent decades, global integrated large-scale production has become an important source of global economic growth. Stagnation of economic activities in various countries can easily cause the global supply chain to be blocked or even interrupted. Fourth, the epidemic has also affected the expectations of global investors, and "black swan" events have occurred frequently in the international financial market. In March, the U.S. stock market fell sharply four times and triggered the circuit breaker mechanism. On April 20, the international crude oil futures settlement price fell to negative values ??for the first time in history. The combination of financial risks and the downturn in the real economy created a surge.

The epidemic has also had an unprecedented impact on domestic economic and social development. First, the production and operation arrangements of enterprises have been affected. The extended Spring Festival holiday and delayed resumption of work have reduced effective working days. Traffic restrictions in some provinces and cities have also affected the flow of people and materials needed for production. The related losses have been reflected in the GDP growth rate in the first quarter. Second, demand side indicators have slowed down year-on-year. Since the beginning of this year, consumer spending on retail, catering, tourism, etc. has dropped significantly. The epidemic has also profoundly affected the behavior of economic entities. In particular, consumers may reduce their consumption in crowded places such as shopping malls and movie theaters for a long time. Third, external imported risks will continue to impact the domestic economy. The situation of blocked international trade is unlikely to improve in the short term, and external demand may continue to decline, further lowering my country's economic growth. Generally speaking, the fundamentals of my country's economy being stable and improving, with long-term improvement, and high-quality development have not changed. In accordance with the decisions and arrangements of the Party Central Committee and the State Council, all regions and departments have taken multiple measures to comprehensively promote the resumption of work and production and restore normal economic and social order in the normal epidemic prevention and control. At the end of the first quarter, my country's industrial enterprises above designated size were close to fully resuming operations. Restaurants, hotels and other enterprises in many places across the country have also resumed operations, and transportation and logistics have further recovered. Economic data has improved since March.

However, we also need to pay attention to the following risks. First, the duration and negative impact of the global epidemic may exceed expectations. The epidemic is still serious in developed countries in Europe and the United States, and the effects of efforts to restart the economy need to be observed. New confirmed cases are rising rapidly in some developing economies and agricultural product exporting countries, and there is a high degree of uncertainty about the future trend of the global epidemic. Second, the effects and spillover effects of highly loose unconventional monetary and fiscal policies in major economies need to be paid close attention to. Monetary and fiscal policies can only hedge against the negative impact of the epidemic. The future global economic recovery and financial situation will fundamentally depend on the progress of epidemic prevention and control, and the negative effects of unconventional policies will gradually emerge. Third, the domestic economy still faces many challenges. Enterprises, especially small and medium-sized enterprises, have been greatly affected by the epidemic. Residents' employment and social security pressures have increased. Coordination in the resumption of work and production in the industrial chain needs to be strengthened. Guaranteed supply and stable prices of major agricultural and sideline products need to be continuously strengthened. Fourth, there are also uncertainties in my country’s international balance of payments and cross-border capital flows. On the one hand, the central banks of major economies have significantly loosened monetary policies and my country is leading the way in epidemic prevention and control and resumption of work and production. The higher returns and relative safety of RMB assets may attract cross-border capital inflows. On the other hand, continued weakening of external demand and declining investor risk appetite may also lead to reduced exports and cross-border capital outflows.

In the next stage, prudent monetary policy must be more flexible and appropriate, grasp the intensity, rhythm and focus of policy introduction, and properly handle the relationship between stabilizing growth, maintaining employment, adjusting structure, preventing risks and controlling inflation. Maintain the growth rate of M2 and social financing to basically match and be slightly higher than the growth rate of nominal GDP, and support high-quality economic development with moderate monetary growth. Continue to maintain the flexibility of the two-way floating of the RMB exchange rate, and do a good job in stabilizing expectations through multiple channels. Strengthen international policy coordination to effectively prevent and control the impact of international epidemics. At the same time, we must adhere to bottom-line thinking, remain highly vigilant against possible external risks, and proactively prepare policy reserves to promote the steady operation of the national economy.