January 30, 2020 / 6:48 AM / a month ago

UPDATE 2-Policymakers fret over risk to global growth from China virus outbreak

* Fed's Powell says China slowdown felt broadly

* Japan PM Abe says looking carefully at impact on tourism

* BOJ's Amamiya signals bigger fallout than when SARS struck

* Outbreak casts shadown on BOJ's rosy view on global outlook (Adds BOJ deputy governor's comments in paragraphs 2, 13-14, market reaction paragraph 3)

By Lindsay Dunsmuir and Leika Kihara

WASHINGTON/TOKYO, Jan 30 (Reuters) - A rapidly spreading virus outbreak in China is emerging as a potentially major new risk to the global economy and leaving policymakers, still grappling with the impact of the Sino-U.S. trade war, fretting over the widening fallout.

In a sign of alarm over the possible damage, Bank of Japan Deputy Governor Masayoshi Amamiya said on Thursday China's huge presence in the world economy must be taken into account in gauging the impact the outbreak could have on global growth.

Stocks around the world tumbled on Thursday as the death toll from the spread of the coronavirus reached 170, forcing airlines to cut flights and some stores to close.

The potential impact on the world economy from the outbreak took center stage in U.S. Federal Reserve Chair Jerome Powell's news conference on Wednesday.

"China's economy is very important in the global economy now, and when China's economy slows down we do feel that - not as much though as countries that are near China, or that trade more actively with China, like some of the Western European countries," Powell said.

Japanese Prime Minister Shinzo Abe also voiced concern on Thursday, saying he was closely watching the impact on Japan's economy including declining inbound tourism.

Zhang Ming, an economist at the Chinese Academy of Social Sciences, a top government think tank, projected the outbreak would cut China's first-quarter growth by one percentage point to 5% or lower.

China has imposed travel restrictions and shut businesses to contain the outbreak, but has not quelled rising concern among companies and governments across the world.

Asian stocks sank on Thursday as the death toll from the virus rose and more cases were reported around the world.

"Apart from the risk to human lives, it is likely to hit travel and consumption activities. In a scenario of widespread infection, it could materially weaken economic growth and fiscal positions of governments in Asia," S&P said on Thursday.

BIGGER DAMAGE THAN SARS

Analysts are comparing the current coronavirus outbreak to the 2002-2003 Severe Acute Respiratory Syndrome (SARS) epidemic, which led to about 800 deaths and slowed Asia's economic growth.

Many say the impact on global growth could be bigger this time as China now accounts for a larger share of the world economy, a view echoed by BOJ's Amamiya.

The number of Chinese tourists visiting Japan has increased by more than 20 times since then, Amamiya said. "The outbreak also spread during China's Lunar (New Year) holiday, when consumption tends to peak," he added.

"We're looking very carefully at developments, including how much the impact could spread," Amamiya said in a seminar in Tokyo hosted by Jiji news agency.

The fallout from the epidemic casts a shadow over the Bank of Japan's projection that global growth will pick up around mid-year and help Japan's economy sustain a moderate recovery.

China is Japan's second-largest export destination. The Chinese make up 30% of all tourists visiting Japan and nearly 40% of the total sum foreign tourists spent last year, an industry survey showed. (Reporting by Lindsay Dunsmuir in Washington and Leika Kihara in Tokyo, Additional reporting by Ann Saphir in San Francisco; Editing by Paul Simao and Jacqueline Wong)

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