Coronavirus- A Glimpse At The Economic Impact
While China was expected to receive an
economic boost in 2020, a new disease has began a turmoil in the world's second
largest economy. Within just a month, the disease has traveled across globes,
infecting people. Public health threat is the main concern for China but the
dent it will put in the global economy, doesn't seem to be small.
BY HARSHIT GUPTA 8
min read
At the end
of 2019, a new type of virus emerged in the central city of Wuhan in China.
This goes by the name Coronavirus. The origin animal of the virus is not
certain yet, but seems to be coming from a bat. As of 30th January, 2020, a
total of 7,915 people in China are confirmed to have been affected and the
death toll has reached to 170. The Coronavirus, also termed as 2019-nCov, has
now reached at least 19 countries (outside of China) being- USA, France,
Germany, Finland, Japan, Cambodia, Hong Kong, Macau, Taiwan, Malaysia, Nepal,
Sri Lanka, Singapore, Thailand, Vietnam, South Korea, United Arab Emirates,
Australia and Canada. In addition to these, India has also reported a case of
Coronavirus. A student from Kerala, who was studying in Wuhan University and
travelled to India, has tested positive for the virus and is being kept in
complete isolation in the hospital. The World Health Organization has said that
the Coronavirus is a global risk but it has not declared it as a Public Health
Emergency of International Concern (PHEIC).
Economic Concern
The impact
of the virus on public health is clearly bad. But what would be the impact of Coronavirus
on the economy. The economy in this equation would not just be the Chinese
economy. The entire world is connected through markets and hence, fluctuations
in the Chinese economy, also being the second largest of the world, there would
be an impact on the global economy. In 2003, China's economy was growing at a
rate of 11%. When the 2003 SARS outbreak occurred, the growth rate fell by two
percentage points in that quarter. And right now, the country is at its lowest
economic growth in 29 years.
A 2018
study estimated that another global influenza pandemic could kill 720,000
people and cost $500bn, or 0.6 percent of global income per year.
Lower and
middle-income countries would suffer the most, with an estimated 1.6 percent of
annual income lost if an influenza pandemic occurred.
High-income
countries are expected to lose about 0.3 percent of the annual income.
It was
announced on Monday that China's finance ministry and National Health
Commission have extended 60.33 billion Yuan ($8.74 Billion) to help contain the
virus. Talking about stock markets, China's Shenzhen and Shanghai composite
stock market indexes fell 3.52 per cent and 2.75 percent respectively before
closing for the Lunar New Year break. The break was thus extended for a week to
dilute the negative trend sentiments on the market.
Wuhan
Wuhan is
the epicenter of the disease. It is dubbed as the Chicago of China and has a
population of 11 million people. It was expected to grow at a 7.8% regional
growth rate in 2020, an important component of China's sluggish economy. But
due to the disease, the region is under lockdown, with shops being shut and
public transportation at a standstill. Also, Wuhan receives 55 international
flights from more than 20 countries. Many airlines have suspended the flights
temporarily, thus affecting business travel. Many countries like the United
States of America, Japan, United Kingdom, parts of European Union are
evacuating their citizens from Wuhan. All countries are advised to refrain any
unnecessary travel to and from Wuhan.
Consumption Spending
A very
important factor for the Chinese economic growth in recent years, has been
"Consumption Spending". In China, around eleven thousand cinema
halls, large number of hotels, restaurants etc. have been temporarily closed.
The Disneyland park in Shanghai has been temporarily closed down. Cities with a
combined population of 55 million have been put under lockdown with severe
restrictions on domestic travel and that too, during the holiday season. Around
70 lakh people had booked travel flights for the Lunar New Year. The actual
travel was only about 40%. All this has
taken a huge toll on the consumer spending. One of the worst affected sectors
is tourism. The share of tourism companies in the nearby countries such as
Japan, Singapore, Thailand fell.
Positive Effects
Not all
companies are experiencing the negative impact of Coronavirus. When there is a
medical problem, the biggest beneficiary is obviously the medical sector. As
share markets are cracking due to 2019 nCov, stocks of certain medical and safety
equipment makers from Japan, South Korea and India have been benefiting a lot.
Japanese firm Kawamoto Corporation, which sells medical products including
masks, is the top gainer, experiencing a
five-fold jump in January alone. The share rose 479 percent to JPY 2,591
on January 29 from JPY 447 on December 30, 2019 on the Tokyo Stock Exchange.
Another Japanese firm Azearth, which produces protective clothing, has
increased upto 139 per cent during this period. The fear of catching the new
disease, is leading people into buying protective clothing, masks, hand
sanitisers etc. Even in India, shares of Bharat Immunological & Biological
Corporation which manufactures and produces a range of pharma products,
including zinc tablets used to treat common cold, lung infections, malaria, or
asthma have increased nearly 50 percent from Rs 7.54 on January 23 to Rs 11.24
on January 28.
Conclusion
While a few medical product suppliers are
benefiting from the outbreak, the bottom-line is that CoronaVirus seems to be
more deadlier than SARS in economic terms. In just a month, Coronavirus cases
reached a huge number and different parts of the world. The impact on China's
consumer spending and the deep effect on the stock market is leading to an
upcoming economic problem on a global scale. China being the second largest
economy, could crack the economies of a large number of countries.