The newly-identified coronavirus dubbed 2019-nCoV, that emerged late last year in the central Chinese city of Wuhan, has become a global health emergency.
China is spending at least $10bn to control the outbreak and reaching out for medical supplies. The government has imposed a quarantine on Wuhan and more than a dozen other cities in the region, a travel ban covering in excess of 50mn people.
The World Health Organisation has warned that “we may only be seeing the tip of the iceberg” from the virus, noting that there have been concerning instances of the disease being spread from people with no travel history to China.
The new coronavirus might have infected at least 500,000 people in Wuhan by the time it peaks in coming weeks, according to a mathematical modelling the London School of Hygiene & Tropical Medicine is using to predict the epidemic’s transmission dynamics.
The global economic impact of the outbreak is playing out in many ways that one.
The outbreak has hurt commodity prices, roiled supply chains and started to trigger declarations of force majeure, with S&P Global Ratings warning the fallout will last for months.
The level of global anxiety and the impact of the “fear factor” in stock markets is probably what we should worry most about, says Torsten Slok, chief economist for Deutsche Bank.
The virus may have already halved the pick-up in global growth in 2020, QNB said in latest report based on “simple scenarios and calculations”.
Aggressive measures taken to contain the virus together account for 70% of China’s GDP and 80% of its exports. China is the world’s largest importer of crude oil and second largest importer of LNG. While oil imports are estimated to have fallen by 25% already, lower gas demand is prompting Chinese gas buyers to consider reducing import volumes, given already high inventories, QNB said.
The virus deaths toll has crossed 1,000, while causing thousands of people to fall gravely ill and overwhelm hospitals in China. But once researchers understand the full spectrum of illness, the overall fatality risk is likely to be much less than 1%, according to Ian Lipkin, director of the Center for Infection and Immunity at Columbia University’s Mailman School of Public Health in New York.
China is a key driver of global growth, but expansion in the world’s second largest economy has already been sputtering amid the ongoing trade war. China’s $14tn-plus economy, second in size only to the US, accounts for almost a third of global growth each year.
For sure, there is not a sector of the global economy untouched by the 2019-nCoV. But what makes China’s economic outlook particularly uncertain is the multifaceted nature of this latest shock. The outbreak has brought about critical interruptions to both demand and supply; impacted both manufacturing and services; and disrupted both internal and external trade, according to Mohamed A El-Erian, a Bloomberg columnist and the chief economic adviser at Allianz SE.
The bottom line: Policymakers, analysts and investors should take into account the degree of uncertainty now in play to factor in the longer-term global economic impact of the outbreak.
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