The global cost of the novel coronavirus (2019-nCoV) outbreak could be three or four times that of the 2003 SARS outbreak, which sapped the world’s economy by US$40 billion, the economist who calculated that figure said.
The sheer growth in the Chinese economy over the past 17 years means that the global health emergency triggered by the 2019-nCoV outbreak has far greater potential to gouge global growth, Australian National University economics professor Warwick McKibbon said in Canberra.
“It’s just a mathematical thing,” McKibbon said in a telephone interview. “Most of the GDP loss that we saw in the SARS model, and in reality, was China slowing down. And so, with China much bigger, you’d expect the billions would be much bigger.”
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While difficult to pinpoint a precise cost as the crisis is still unfolding, the effects would be experienced mostly through changes in “human psychology,” he said.
“Panic is what seems to be the biggest drain on the economy, rather than deaths,” he added.
McKibbon’s forecasts are in line with those of other analysts.
Nomura International forecast that the negative effects on China’s growth could exceed those seen during the SARS outbreak.
Real GDP growth in the first quarter could “materially drop” from the 6 percent pace in the fourth quarter of last year, maybe by even more than the 2 percentage-point quarterly deceleration seen in the second quarter of 2003, Nomura economists led by Lu Ting (陸挺) wrote in a report to clients.
“Back in 2003, China accounted for just 4 percent of global GDP. Fast forward to 2020 and its share has increased to 17 percent. That means the global spillover if China’s growth slumps will be larger,” Bloomberg economists Chang Shu (舒暢), Jamie Rush and Tom Orlik said.
“Hong Kong stands out as the most exposed — our simulation shows a hit of 1.7 [percentage points] in the first quarter. South Korea and Vietnam would also suffer, each slowing by 0.4 [percentage points]. Japan would take a 0.2 [percentage-point] hit,” they said.
More contagious than SARS, but less deadly, the insidious nature of 2019-nCoV is such that it often presents as mild cold-like symptoms and can go undetected, which could potentially protract the crisis for longer than the 2003 epidemic.
The new virus, which emerged in central China late last year, has reportedly infected more than 8,200 people in two months, eclipsing the 8,096 SARS cases reported from November 2002 through early 2003, when the contagion spread from China across Southeast Asia and to North America and Europe.
“If a country had a bad epidemiological outcome, then their shocks were likely be a lot bigger than countries that were able to control it well,” McKibbon said, referring to his findings from examining the financial effects of SARS.
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