The economic impact of the coronavirus pandemic could cascade from a health catastrophe into a financial crisis in countries struggling to cope, Singapore's trade minister warned on Thursday.
Many countries are now "fiscally challenged," with few having the headroom to deploy monetary policy as rates are currently so low, Chan Chun Sing, Singapore's minister for trade and industry, told CNBC. "That is a dangerous situation," he said.
"What we are concerned is that, if we are not careful, some of the countries might get into a financial crisis beyond a health crisis, beyond a economic crisis," Chan said.
"Because if you can't have a healthy fiscal balance, you need to borrow. If you can't borrow, then you need to print money. If you print money, you're going to debase your currency, and that's going to be very serious on the stability of the entire global financial system, leading to real impact on the real economy," he added.
The outbreak has led major institutions and banks to cut their forecasts for the global economy. In a March report, the Organisation for Economic Co-operation and Development said it downgraded its 2020 growth forecasts for almost all economies. S&P Global Ratings predicted global growth is set to be pushed towards zero.
"Not many countries have the means like Singapore from our reserves to inject the necessary liquidity into the system," Chan said.
Singapore has announced three stimulus packages since the start of the outbreak worth a total of 59.9 billion Singapore dollars ($41.9 billion), accounting for around 12% of the country's gross domestic product.
Chan called on the world's major economic powers to step up their leadership in these trying times to "provide stability" for the global financial system.
"We must make sure that we have concerted effort (from) everybody, especially for the bigger economic blocs, to provide the leadership for us to come together to stabilize the financial system and prevent a knock on impact, because it can become a cascading impact and a vicious cycle from a health crisis, to an economic crisis, and a financial crisis," he said.
Singapore, a tiny Southeast Asian country, was one of the earliest countries outside China to report cases of the coronavirus disease, formally named COVID-19.
As the pandemic worsened globally, some countries have also turned more protectionist. That could pose a risk for global supply chains, Chan also warned.
Fears of food protectionism have grown in recent weeks. Some countries have stopped exports of supplies to ensure their own food security. For instance, Vietnam has curbed rice exports and Russia has halted processed grain exports. Some governments have also been hoarding supplies.
Chan told CNBC: "We must imagine that the world will not be the same after the virus ... What we are seeing is that at this point in time, some countries are responding with increased protectionist measures, sometimes under the guise of nationalist pressures."
But the global production system is "closely intertwined," with countries interdependent on each other, he stressed.
"What we are most fearful in this crisis is that as people take on more protectionist measures ... we might inadvertently break the global supply chain," Chan warned.
— CNBC's Yen Nee Lee and Huileng Tan contributed to this report.