by Irvin Li
The 2019 Coronavirus has had many devastating effects over the past few months. As mortalities surpass 2000, it would be difficult not to acknowledge the assuaged yet sustained severity of this virus. In this short passage, I shall specifically address the economic aspect of how the virus has impacted the world economy so far.
At this point, we have enough evidence to conclude that the Coronavirus’s infectious nature far surpasses that of MERS or SARS. Scientists predict its toll on global economies will be far greater than both viruses. This effect is heightened by the much more integrated trading systems existing across the globe today that binds supply chains and capital among industries and regions more closely in order to maximize efficiency. But that does lead to augmented rippling effects of any single recessing economy.
Inside China, calculating the loss from an extended lunar new year break, the lack of transaction caused by movement restrictions, and the general impedance to consumers’ willingness to shop, it is projected that the nation’s growth this year in GDP will slow to a rate of 5% compared to 6% from last year. Foreign companies such as Apple, Starbucks, and McDonalds are expected to brace for a decrease in revenue as well.
Internationally, the most significant impact is perhaps the sudden disruption to many manufacturing supply chains; especially in the electronics and automobile sector. This will delay the availability of new products to be assembled or sold elsewhere. The virus has also interrupted certain shipping routes. 7 out of the 10 largest ports in the world are along the Chinese coast. 2 others are located respectively in Singapore and Busan which are also regions that have been subject to the spread of coronavirus to varying degrees.
Other more indirect consequences lie throughout each and every station that rely on capital flow such as banking and finance. However, the most immediate byproduct of the coronavirus was a sharp drop of 16% in crude oil prices in February. With most of China locked inside their own homes, demand for gasoline decreased by 20% for the biggest importer of oil.
Compared to SARS from 2002 to 2003, which have cost the global economies a total sum of 50 billion dollars that accounted for 0.14% of global GDP at the time, COVID-19 is as of right now estimated to cost the world potentially 360 billion dollars, 0.42% of the current global GDP.
Most of these losses would come out of Asian markets, seeing that established economies like Japan have shrunk at an annual rate of 6.3% in the last quarter, suggesting that a re-stimulated forecast is unlikely in the short term. Other countries like South Korea, Vietnam, Malaysia, and Thailand would also take a hit in the retail and service sector due to the pause on Chinese tourism.
For our America, the negative effects of the coronavirus would not be as tremendous. Stocks at this point have quickly rebounded and climbed despite the initial scare. Another silver lining is that the Chinese agricultural production – now halted by the coronavirus coupled with recent reoccurrences of swine and chicken flu in livestock – will most likely create more buying room for China to fulfill the agreed-upon $200 billion dollar import threshold. Successful fulfillment of this threshold will certainly be good easing signs of the ongoing trade disputes.