Commentary
Is it too early to start thinking about how the global outbreak of the new coronavirus will affect the world’s economy? With the Dow Jones Industrial Average falling 454 points—a 1.6 percent decline—on Jan. 27, it’s reasonable to think that more disruptions could be on the way.
And though we don’t know yet the scale or duration of this deadly disease, if the 2003 severe acute respiratory syndrome (SARS) outbreak is any indication, then economic stresses are unavoidable.
The question is, how bad could it get?
Coronavirus Is Salt in China’s Wounded Economy
As China enforces the biggest quarantine in history, with 17 cities at a standstill, such a massive event can’t help but influence economic metrics. Mandating millions of people to stay home as a way to prevent further spread of the virus means that people aren’t working or out shopping. That’s adding salt to an already wounded Chinese economy.Furthermore, although millions of people have taken the week off for the Chinese New Year celebrations, Chinese authorities are extending the time of absence to Feb. 9. Schools will remain closed for even longer, with sporting and religious events canceled. Nobody in those cities is going anywhere.
Of course, the virus’ two-week incubation period, when it is also contagious, makes a delayed return to work a sensible precaution. That’s a big factor, too, because the SARS virus was not contagious during its incubation period. At the very least, China should expect a contraction in its consumer spending from these actions.
The economic damage could be as much as a 1 percent drop in China’s 2020 GDP, according to Economist Business Intelligence Unit figures. But that estimate is based on the effect that the SARS virus outbreak had on a much smaller Chinese economy. China’s economy is much larger today, but then, the new coronavirus is bigger, too.
Will the New Coronavirus Be Worse Than SARS?
The current situation may, in fact, have the potential to become much worse than the SARS episode. For one, its virulence is accelerating as it mutates to become more adaptable to human beings. No one yet knows how much that will raise its level of contagion or danger to human life.Secondly, as noted above, it’s contagious during its two-week incubation period. And, according to Yi Guan, China’s most celebrated virologist, they have already missed the golden window of containment for the new coronavirus. Containing it will come at a much higher cost and could take much longer.
Third, China is working around the clock to add or free up 100,000 hospital beds in Hubei Province—which is ground zero for the outbreak—to address the anticipated need.
None of these factors bode well for a quick resolution. Indeed, some are already saying that the spread of the new coronavirus may lead to a worldwide recession.
