While much of the world’s attention is rightly focused on the human toll of COVID-19, the economic toll of the outbreak also has potentially disastrous implications. According to the World Economic Forum, the spreading coronavirus is taking a toll on economic players around the world, from farmers in the Americas, to manufacturers of solar panels in India, to tourism workers across Asia. China, home to the majority of confirmed cases so far, has been dubbed the “world’s factory” due to the significant portion of global manufacturing that now typically takes place there.
Data analysis firm IHS Markit predicts that the new coronavirus outbreak will be worse for the global economy than the 2003 SARS epidemic was – costing the global economy about USD40 billion.
As China is no longer only producing low-cost products like sneakers and sweatpants for the masses as it was during SARS, and has evolved into a crucial element of the global economy, this crisis could create a substantial threat.
China accounted for 4.2 percent of the global economy in 2003, but now determines 16.3 percent of the world’s GDP. Therefore, any slowdown in the Chinese economy sends not ripples, but waves across the globe. The uncertainty in China could also affect global oil prices as China accounted for half of the world’s oil demand growth in 2019.
However, most of the economic cost of the outbreak is not related to the virus, but the panic surrounding it.
The long-term economic impact of the new coronavirus outbreak will be determined largely by China’s containment measures, and the IHS Markit reports that if the current and unprecedented confinement measures in China are lifted progressively beginning in March, the resulting economic impact will be concentrated in the first half of 2020.
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