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Here’s how coronavirus is likely to impact the global economy

We look at various sectors which are likely to take a hit due to ongoing coronavirus disease.

By: Express Web Desk | New Delhi | Published: February 18, 2020 6:39:52 pm
coronavirus update, coronavirus death toll, coronavirus china deaths, coronavirus news, wuhan, indian express People wearing protective masks walk outside Forbidden City in Beijing, China. (Image source: Reuters)

The novel coronavirus disease (COVID-19) has claimed over 1,800 lives in China alone with more than 72,000 being infected across the world ever since the deadly communicable disease broke out in China’s Wuhan. The COVID-19 death toll has already surpassed that of the SARS outbreak in 2002-03 and the World Health Organisation (WHO) has declared it a global health emergency.

The deadly virus, which has infected people in over 25 countries, has sent a sense of fear in investors across global markets. With international trade getting disrupted and global outlook looking weak amid growing concerns over containing the outbreak of the COVID-19, the impact of the disease can be felt in the Indian economy and markets as well.

We look at the various sectors which are likely to take a hit due to the coronavirus disease:

Global economy

The impact of COVID-19 will be significantly felt in China’s economic growth in the near term since the virus originated from there. The Chinese government has tried very hard to contain the disease in Wuhan, the capital of the country’s Hubei province. It has limited the trade and commerce in the city and blocked the movement of the public in the city in a bid to quarantine the infected people, however, this, in turn, has severely affected the trade and commerce in the region, particularly during the country’s annual Lunar New Year celebrations.

China being the largest economy in Asia and the second-largest economy in the world, the economic impact of coronavirus is likely to trickle down to other countries and their economies as well who deal with the Asian giant. There are many companies which have shut down operations in China due to the outbreak of COVID-19.

A recent report by the Financial Times, that quoted a Deutsche Bank forecast, said that because of coronavirus, China’s economic growth is going to be 1.5 per cent lower in the first quarter of 2020 compared to the same period in 2019, at 4.6 per cent. The global economic growth during the period is expected to be slower by 0.5 percentage points.

Markets

The outbreak of coronavirus has triggered a gradual fall in the global stock, commodity and money markets during the past few weeks. Investors are concerned about the damage it will have in the businesses and economy.

Multi-national companies such as PepsiCo, Siemens and Peugeot Citroen have their offices and factories in Wuhan and other parts of Hubei province. There are many companies have suspended their work so as to contain the virus, this, in turn, has affected their businesses and stock prices.

Fast-food chains such as McDonald’s, Pizza Hut and KFC too have felt the impact of the coronavirus in China. Some of their outlets in the affected region had to be shut down which is likely to have impacted their earnings per store.

Auto components

One of the key drivers of China’s economic growth over the years has been its automobile and electronic equipment industry. The country is a manufacturing and supplying hub for various automobile companies in the world.

Over the past decades, Wuhan has turned out to be a primary hub for the country’s ever-rising cars parts and accessories export. This sector has had a triple growth during the last decade while engine and motor exports have surged around four times. Due to this ongoing scare of coronavirus, many of such factories have had to be shut down indefinitely. This has affected the supply chain in the automobile sector across the world.

The lack of auto components has already begun to be felt in the global automobile market. As per the Financial Times report, Fiat Chrysler has already rung alarm bells by saying that it is finding difficulty in sourcing key auto parts from its suppliers in China, and might be forced to halt its production within a few weeks if the virus situation doesn’t improve. Hyundai had to shut its production in South Korea earlier this month, while Volkswagen has postponed restarting production at its factories in China until February 24, according to a report by Deutsche Welle.

Pharmaceutical industry

In India, the prices of paracetamol, which is the most commonly used analgesic, have surged 40 per cent, while the cost of azithromycin, an antibiotic used for treating a variety of bacterial infections, has jumped by 70 per cent, according to a Bloomberg report.

India is one of the largest suppliers of generic drugs across the world and has about 12 per cent of all manufacturing sites catering to the US market. The pharmaceutical firms rely on China for as much as 80 per cent of its active pharmaceutical ingredient (API) requirement.

Apple’s business hit

On Monday, Apple became one of the first mobile phone manufacturers to admit that the coronavirus was affecting its business. The premium smartphone maker said that it was cutting its sales expectations for the ongoing quarter, which it had earlier projected to be robust.

The iPhone manufacturer, which is heavily dependent on its factories in China and the consumers there, said in a statement that its supply of smartphones would be hampered because production was slower than expected as China reopened its factories.

The premium smartphone maker also added that demand for its devices in China had been affected because of the outbreak of the deadly virus. Apple had closed all 42 of its stores in China last month and most of them are yet to reopen.

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