The Impact of the Coronavirus, now COVID-19

FIVE things you need to know about COVID-19 today 

1. The daily infection rate of the novel coronavirus, now referred to as COVID-19, is more than double the daily rate of SARS virus infections in 2002/03
2. While COVID-19 has infected more people than SARS, it appears to be less fatal. The latest mortality rate for COVID-19 is roughly 2.3% compared to 9.6% for SARS
3. If Chinese officials can contain the spread of the virus by March 2020, Chinese GDP is expected to fall by over 2 percentage points to less than 4% y-o-y in the first quarter
4. If the virus is not contained by the second quarter of the year, China could go into its first technical recession in at least 30 years
​5. In addition to the humanitarian crisis, COVID-19 will adversely affect the Chinese and other economies. The initial impact has been reflected in lower household consumption, travel, tourism and entertainment services, spreading to production, the management of various supply chains, demand for commodities e.g. oil, and international trade

 
Severity of COVID-19
 
The novel coronavirus, now referred to as COVID-19, has infected an average of 2 300 people per day since 20 January this year. The number of confirmed cases has risen above 75 000 as at 24 February 2020. To put this into perspective, the peak number of confirmed SARS infections during the 2002/03 crisis was around 8 500, with an infection rate of about 790 people per day.
 
While the COVID-19 virus has infected more people than SARS, it appears to be less fatal. The latest mortality rate for the COVID-19 is roughly 3.1% compared to 9.6% for SARS. So far, this remains a largely China-centered epidemic, with 97% of all confirmed cases coming from mainland China, however, the virus is starting to spread globally, with particularly high infection rates in South Korea and Italy.
 
The Chinese government continues to implement a range of stringent steps to curb the spread of the virus. These include:

Locking down 16 cities in the Hubei province
Widening intercity travel and transport restrictions
Advising people to avoid restaurants, hotels and tourist sites
Extending the Lunar New Year holiday.
 
Many provinces have also decided to delay the opening of business and factories until at least 10 February.
 
Additionally, the declaration of the COVID-19 outbreak as a public health emergency of international concern prompted many countries to announce the shutting down of all direct travel to and from mainland China.
 
Potential economic impact
 
While extreme measures to limit the spread of the virus are critical from a humanitarian perspective, they will have a negative impact on the Chinese economy, as well as many other countries. The initial impact has been reflected in lower household consumption, travel, tourism and entertainment services, but is now spreading to production, the management of various supply chains, demand for commodities e.g. oil, and international trade.
 
The economic impact of the virus remains uncertain and depends on the duration and eventual seriousness of the outbreak. A starting point in trying to assess the potential economic impact would be to look at the effect of the SARS outbreak in 2003.
 
During the SARS outbreak, China’s GDP decreased by two percentage points from 11.1% year on year (y-o-y) in Q1 2003 to 9.1% y-o-y in Q2 2003. The subsequent recovery in consumer and business sentiment, along with some policy support, meant that growth recovered and for the year, reached 10.1% up from 9.1% in 2002.
 
Consumption and the services sector were affected the most, with retail sales growth decreasing to 4.3% y-o-y in May 2003, down from 10.0% y-o-y in January 2003. Other sectors affected sectors include:

Transportation and storage. Growth in the value added to GDP decreased to 2.3% y-o-y in Q2 2003, from 7.7% year on year in Q1 2003);
Hotel and catering services shifted from 7.4% y-o-y in Q2 2003 vs 11.0% y-o-y in Q1 2003;
The tourism sector experienced a decrease in the number of inbound tourists from 5.6 million in 2002 to 4.3 million in 2003.
 
Since services and consumption increasingly drive economic growth in China, the effects of the coronavirus on China’s economic growth are expected to be larger than the SARS virus in 2003. Furthermore, China’s economy is on a structurally slower economic growth trajectory, therefore, a fall in GDP growth is expected be much more pronounced.
 
For 2020, consensus growth forecasts have been lowered to 5.7% from 5.9% before the outbreak. If Chinese officials can contain the spread of the virus by March 2020, GDP is expected to fall by over two percentage points to less than 4% y-o-y in the first quarter, with some recovery in the remaining three quarters. If the virus is not contained by the second quarter of the year, China could go into its first technical recession in at least 30 years.

Read the full article: http://stanlib.evlink19.net/public/landing-pages/The-Impact-of-the-Coronavirus-AkK8dVtxATmxt9Lh 

February 25 2020 By Ndivhuho Netshitenzhe - Economist Health