Coronavirus Outbreak Update

Updated: Feb 6

There is no escaping the ferocity of the coronavirus and its effects fast encroaching the globe and its economy. With the fear of a larger outbreak looming, Chinese tourism is decreasing along with shopping and exports, with the virus spreading faster than the previous deadly SARS outbreak in 2002. The World Health Organization (WHO) has praised recent efforts by the Chinese authorities for declaring the virus an international health emergency, with a wider-spread lockdown following.

The guideline and base we currently have to go off is the SARS epidemic, which was a global GDP drop of between $30 billion and $100 billion (equal to 0.08% and 0.25%), with China’s growth rate dropping to 1.8% from the 2.8% average. With the Chinese economy now being 4x what it was in 2002, the results can be heavily magnified, although they did bounce back relatively quickly. The impact of the virus from Wuhan reflects how important China is to the rest of the economy. Central Chinese governments have allocated $12.6 billion to go towards medical equipment and treatment. Interest rates for individuals and small businesses have been slashed and the Bank of China is allowing people of the Wuhan and Hubei province longer to repay loans if their source of income is affected by the destruction of the virus.

Businesses are acting with great caution, McDonald’s, Ikea, and Disneyland to name just a few that have closed their doors in China so far for prevention control. McDonald’s is in the process of a huge expansion and will no doubt now be delayed due to the knock-on effect. If the outbreak continues until the end of March, economic growth is likely to have a drop of 5% in this first quarter (in a best-case scenario if not lasting longer) advises Zhang Ming, a Chinese economist.

China’s recent pledge to up their US trade relations by $200 billion in imports of goods and services isn’t likely to affect trade relations as there are natural disaster exemptions in the Phase One agreement deal, with this likely to be taken into consideration. The deal states (Article 7.6): “In the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement, the Parties shall consult with each other.” A mild response from the US may be announced. Oil prices have declined in recent weeks more relating to containment measures leading to less demand for raw materials and oil from China. The Hang Seng index had already fallen by 6% in a few days since re-opening after the Lunar New Year.

With confirmed deaths and cases being confirmed daily across the globe, we can only keep ourselves prepared and protected with obvious yet effective practices of thoroughly washing hands regularly, wearing protective masks when out in public, and limiting those public outings and closer interactions as much as possible unless absolutely necessary. Of course, should you have any medical concerns or flu-like systems, report to your local authority and seek immediate medical advice.

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