It is very rare that the Chinese government admits defeat and asks for outside assistance. Therefore, we can only assume that the published data on the coronavirus epidemic is understated and perhaps worse than many experts are suggesting. It now appears as though the virus can be spread between individuals before the carriers even shown signs of the infection. So where does this leave the worldwide economy?
Spreading around the world
At this moment in time the virus is predominantly situated in China but just recently we have had reports that the coronavirus has hit France, UK and the US. Economists are very wary of placing an economic figure on issues such as the coronavirus simply because there are a lot of unknown variables. Perhaps the best way to do it, this was recently reported in a BBC article, is to compare and contrast the coronavirus impact against SARS.
SARS outbreak
The SARS outbreak of 2003 is said to have impacted worldwide economic growth by 1% in the second quarter alone. This equates to around $40 billion in lost economic activity across the world which is significant. Whether or not this is the real figure is debatable but what we do know is that the coronavirus is already having a major impact in China.
Transport hubs
The Wuhan city in China, where the impact of the coronavirus is most visible, is a major transport hub of China. The fact that the city is effectively under lockdown with significant travel restrictions does not bode well for the short to medium term. Yes, we have seen an increase in demand for various surgical supplies but worldwide travel and holidays in particular have been impacted almost immediately. It will be interesting to see if this hits the import/export of goods as this could tip an already weak Chinese economy over the edge.
Vaccine on the way
There are high hopes of a vaccine for the coronavirus but this could take anywhere up to 12 months to fast-track. This would obviously have an impact on future outbreaks of the coronavirus but any short-term impact will be limited. On a more positive note, pharmaceutical groups across the globe are now extremely well prepared for such outbreaks with vaccines for the likes of SARS and bird flu now available.
In years gone by we have heard the conspiracy theories regarding outbreak of such viruses which obviously have a huge impact on pharmaceutical groups. The truth is that it is difficult to locate the exact area of the outbreak and indeed in many cases how it occurred. There are rumours, counter rumours and untruths floating around but nobody is certain at this moment in time.
Investors remain unconcerned
It is a sign of the times that issues such as SARS, bird flu and now the coronavirus are very much taken in the stride of investors. We have seen little impact on worldwide stock markets, despite grave forecasts about the potential fatality numbers, but things can change very quickly. Historically, the $40 billion loss estimated as a consequence of SARS was partially/wholly recovered in later months once the virus was under control. So quite why investors are often so dismissive of issues such as the coronavirus is a mystery but they are!