Coronavirus: Economic outlook for China and the global economy

January 29, 2020

As the number of new coronavirus cases climbs past 5,000 on Tuesday 28th. The virus has already surpassed that of SARs and the economic impact from the new virus could be more severe that the 2002-2003 epidemic or at least similar, according to economists.
Chinas real GDP growth dropped by 2 percent points from Q1 to Q2 of 2003 due to the SARs outbreak. Based on these assumptions we could be looking at a drop of at least 2pp in Q1 2020 compared to the 6% achieved in Q4 2019.
However, some analysts are saying that the coronavirus may prove to be only a temporary shock on both the supply and demand sides. Mark Williams, chief Asia economist at Capital Economics wrote in a note on Monday ‘’Even if the coronavirus is brought under control quicker than SARs was in 2003, the economic impact now looks to be of at least a similar scale.
China has seen a slowdown in activity as Shanghai has told businesses to remain shut for an additional week, while travel restrictions are in place for around 20 cities. Many other services including rail and long-distance bus journeys have been suspended.
Whilst this is a more proactive and open response from the Chinese at that this time to contain the spread of the virus, it could also make the economic disruption much greater.