Impacts of Coronavirus Containment Effort Ripple Through Global Economy |

[bhaigan]

Coronavirus will have a larger negative effect on the global economy than the SARS outbreak in 2003.  At the time of SARS, China was the sixth largest economy, accounting for only 4.2% of world GDP.  China is now the world’s second largest economy, accounting for 16.3% of world GDP. Therefore, any slowdown in the Chinese economy sends not ripples but waves across the globe.  

If the current and unprecedented confinement measures in China stay in place until the end of February, and are lifted progressively beginning in March, the resulting economic impact will be concentrated in the first half of 2020, with a reduction of global real GDP of 0.8% in Q1 and 0.5% in Q2. In this scenario, the coronavirus and resulting measures will reduce global real GDP by 0.4% in 2020. Conversely, we expect the lifting of the confinement measures to add 0.4% to global real GDP in 2021, as the release in pent-up demand filters through the economy (see graph below).

On the other hand, if confinement measures begin to lift on February 10, the impact on global GDP will be more limited, resulting in a 0.1% reduction in global GDP growth in 2020 and 0.4% reduction in China’s annual growth.