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For the past several weeks, leaders around the world have worked to stifle the spread of the coronavirus that has sickened 69,000 people globally and led to more than 1,600 deaths.
While the primary focus has been on the health risks of the virus — which can cause severe respiratory illness known as COVID-19 — experts have begun to worry about the negative impact that a prolonged outbreak could have on the world economy. “We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” the chairman of the U.S. Federal Reserve said Tuesday.
The epidemic is caused by a virus similar to the one behind SARS, which killed 774 people in 2002 and 2003. SARS also slowed China’s economic growth and caused an estimated $40 billion in losses worldwide. The current outbreak has disrupted a number of industries over the past few weeks as factories have shut, travel has been restricted and uncertainty has dampened financial markets.
Why there’s debate
Many analysts fear that the coronavirus could be much more damaging than SARS, in large part because of China's rising role in the world economy in the past two decades. In 2003, China represented roughly 4 percent of the global economy. In 2018, its share had grown to about 16 percent. Businesses have also become much more integrated across borders, and China serves as a major manufacturer in supply chains across countless industries. If factories are shut for an extended period of time, the global trade market could be disrupted. Some economists fear the virus could push China into a recession large enough to cause a global downturn.
Other predictions are much less apocalyptic. The ultimate impact of the virus will depend on how long the epidemic lasts and whether it spreads to other countries in significant numbers. If the outbreak is contained effectively, the effects could be limited to a marginal dip in China’s growth that represents a small blip in the world economy.
Some economists caution against making any forecasts at all, given the uniqueness of the outbreak, the lack of information from China’s authoritarian government and the general unpredictability of the world economy. “Everyone is guessing,” one economist said.
Millions of Chinese workers returned to work this week after the extended Lunar New Year holiday, but travel restrictions put in place to combat the virus have forced many factories to remain closed. The effectiveness of China’s efforts to reopen its factories is expected to play a major role on how severe the economic impact of this coronavirus outbreak will be.
Too much is unknown to make any solid predictions
“There is so much unknown about the virus and its potential that the numbers can only be educated guesses.” — Don Pittis, CBC
The effects are already being felt
“The knock-on effects of the virus and China’s dramatic response are daily making themselves felt, from disrupted air travel to rattled supply chains and plummeting commodity prices that are dampening growth prospects from Southeast Asia to South America and beyond.” — Keith Johnson and James Palmer, Foreign Policy
The impact will be minor if the virus is contained
“Economists say the current level of disruption is manageable. If the number of new coronavirus cases begins to slow, and China's factories reopen soon, the result will be a fleeting hit to the Chinese economy in the first quarter and a dent in global growth. If the virus continues to spread, however, the economic damage will increase rapidly.” — Charles Riley and Julia Horowitz, CNN
The outbreak could have a lasting impact on China’s viability in global trade
“The greatest cost will come to China’s reputation as a reliable trade partner. … China creates the impression that it has learned little since the SARS crisis, giving the rest of the world reason to try to reduce its dependence on China for growth and production.” — Ian Bremmer, Time
The virus is stunting recovery from the U.S.-China trade war
“[Harm from the virus] is all too apparent to exporters and manufacturers that suffered from the U.S. trade war with China. They were hoping the recently signed first stage of a trade deal between the two countries would pave the way for improved sales in 2020, but those dreams are now threatened.” — Jeffry Bartash, Marketwatch
Unless panic sets in, the financial markets can withstand the impact
“The level of global anxiety and the impact of the ‘fear factor’ in markets is probably what we should worry most about.” — Economist Torsten Slok to Bloomberg
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