The Impacts of Coronavirus on the Global Economy The coronavirus has infected nearly 40,000 people killing over 900 of its infected patients.
The first signs of the virus was in 2003, when SARS emerged in China, killing hundreds of people and sparking panic that sent a chill through the global economy. Now, the current virus could potentially be more damaging and problematic for the economy and its consumers especially in China, producing 16% of the total global output. “The outbreak has the potential to cause severe economic and market dislocation. But the scale of the impact will ultimately be determined by how the virus spreads and evolves, which is almost impossible to predict, as well as how governments respond,” said Neil Shearing, group chief economist at Capital Economics.
Globalization has encouraged companies to build supply chains that cut across national borders, making economies much more interconnected. The major central banks have used up much of the ammunition they would typically deploy to fight economic downturns since the 2008 financial crisis, and global debt levels have never been higher. Rising nationalism may make it harder to coordinate a worldwide response if that’s required. The virus is currently impacting supply chains and disrupting companies. Car plants across China have been ordered to remain closed, preventing global automakers Volkswagen (VLKAF), Toyota (TM), Daimler (DDAIF), General Motors (GM), Renault (RNLSY), Honda (HMC) and Hyundai (HYMTF) from resuming operations in the world’s largest car market. The outbreak in China will slash production by about 15% in the first quarter. Luxury good markers are also impacted by consumers who spend big bucks inside China and consumers worldwide. British brand Burberry (BBRYF) has closed 24 of its 64 stores in mainland China, and its chief executive warned Friday that the virus is causing a “material negative effect on luxury demand.” 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 large 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.
This is significant in many ways, especially since the virus is impacting the global economy which is huge because that affects everyone not just the infected. This could potentially increase the motive to find solutions faster to combat the disease. China is hoping the United States will step in to help control the infectious disease.