I should have been flying to Beijing on 16 February. This now seems unlikely.

 

But my problems are minor compared with those of many others. Google, GM and Starbucks are among the companies that have shut down their entire China operations in response to coronavirus which has spread rapidly from Wuhan, where it was first observed. Data released last week showed that there had been more than 5,000 cases in a month (latest figures are around 8,000 and probably much more by the time you read this) – SARS took 6 months before the number of cases reached 5,000.

 

Coronavirus spreads so fast because those who get it are infectious before they know they have it. So quarantine measures, unless they apply well beyond those who are currently infected, will largely be a matter of shutting the stable door after the horse has bolted.

 

It is now estimated that SARS reduced world GDP in 2003 by between $30 and $100 billion[1]. This is between 0.08% and 0.25% of world GDP.

 

The economic impact of the coronavirus is bound to be much bigger than that of SARS. First, the bulk of the economic impact will be in China. Now, in 2020 China accounts for 16.9% of the world economy compared with 4.3% in 2003 so its economic footprint is nearly four times larger. Second, the disease is spreading much faster. Third, although current indicators suggest that the disease is less virulent than SARS, from the point of view of economic damage this is offset by the need to quarantine much larger groups than just those whom we know are currently infected.

 

Our worst-case calculation assumes that the coronavirus has six times the speed of spread of SARS and therefore has a six times multiple effect on the Chinese economy. As the Chinese economy is nearly four times larger relative to the world economy, scaling up forthis as well would create a world GDP negative impact of 1.8% to 6% based on the retrospective estimates of the impact of SARS. Presumably if this became a serious risk, authorities would take action to reduce the impact, so this is unlikely to be the final impact on GDP.

 

With world GDP set to grow by 2.9% this year before the coronavirus impact became apparent, it is clear that unless a cure and a vaccination are found rapidly, the fragile recovery that we predict is at risk. That is why  – from an economics point of view – it is so vital that a cure and a vaccine is found.

 

[1] See The Impacts on Health, Society, and Economy of SARS and H7N9 Outbreaks in China: A Case Comparison Study by Wuqi Qiu, Cordia Chu, Ayan Mao, and Jing Wu  Journal of Environmental and Public Health, 2018

 

Contact: Douglas McWilliams dmcwilliams@cebr.com phone: 07710 083652