Coronavirus may cut global growth to 2% in early 2020

Subject

Economic impact of the coronavirus.

Significance

The shape of the human and economic effects of such epidemics can be easily mapped, but the scale and length can vary enormously. Critical factors determining this include the key characteristics of the virus, the efficacy of containment measures and the type of economies involved. China accounts for a far larger share of world GDP and trade than in past decades, and this epidemic poses a serious economic threat in coming months. The death rate seems to be much lower than for SARS in 2003 but the infection rate is far higher. The third key characteristic, the incubation rate, is similar, at two weeks.

Impacts

• The epidemic and the ensuing economic turbulence will continue for at least two months despite substantial quarantine efforts.
• If the infection rate is similar to annual flu strains and quarantining is ineffective, many millions of Chinese people could be infected.
• The pharmaceutical industry aims to produce a vaccine in record time, boosting confidence in the ability of science to manage outbreaks.
• Financial markets enjoyed a New Year rally, but volatility is likely to surge as markets will struggle to price the impact of the outbreak.