Image: REUTERS/China Daily
17 Feb 2020
Rosamond Hutt Senior Writer, Formative Content
As the world grapples with the coronavirus, the economic damage is mounting with the OECD warning the virus presents the biggest danger to the global economy since the financial crisis.
There are now more than85,000 confirmed cases of COVID-19 globally, the new coronavirus that emerged in Wuhan, China, in December and is spreading around the world.
Businesses are dealing with lost revenue and disrupted supply chains due to China’s factory shutdowns, tens of millions of people remaining in lockdown in dozens of cities and other countries extending travel restrictions.
With many companies and countries depending on the health of China’s economy, here are a few ways the outbreak is sending ripples around the world.
China is the world’s second-largest economy and leading trading nation, so economic fallout from coronavirus also threatens global growth.
Economists polled by Reuters between 7-13 February said they expected China’s economic growth to slump to 4.5% in the first quarter of 2020, down from 6% in the previous quarter – the slowest pace since the financial crisis.
However, the economists were optimistic China’s economy would recover quickly if the virus could be contained.
And on the 2nd of March 2020 the OECD warned of the dangers facing the global economy. In its latest Interim Economic Outlook, the organization said the virus was the “greatest danger” to the world economy since the financial crisis of more than 10 years ago.
Falling oil demand
China is the world’s biggest oil importer. With coronavirus hitting manufacturing and travel, the International Energy Agency (IEA) has predicted the first drop in global oil demand in a decade.
“Global oil demand has been hit hard by the novel coronavirus (COVID-19) and the widespread shutdown of China’s economy. Demand is now expected to fall by 435,000 barrels year-on-year in the first quarter of 2020, the first quarterly contraction in more than 10 years,” the IEA said in its latest monthly report.
Disruption to commerce
The shortage of products and parts from China is affecting companies around the world, as factories delayed opening after the Lunar New Year and workers stayed home to help reduce the spread of the virus.
Apple’s manufacturing partner in China, Foxconn, is facing a production delay. Some carmakers including Nissan and Hyundai temporarily closed factories outside China because they couldn’t get parts.
The pharmaceutical industry is also bracing for disruption to global production.
Many trade shows and sporting events in China and across Asia have been cancelled or postponed.
The travel and tourism industries were hit early on by economic disruption from the outbreak.
Global airline revenues are expected to fall by $4-5 billion in the first quarter of 2020 as a result of flight cancellations, according to a report from the UN’s International Civil Aviation Organization (ICAO).
ICAO also forecasts that Japan could lose $1.29 billion of tourism revenue in the first quarter due to the drop in Chinese travelers while Thailand could lose $1.15 billion.