Macro & Investment Insights

Coronavirus – tracking the path, anticipating the impact

  • 10 February 2020
  • 10 min read

Key points

  • A new coronavirus emanating from Wuhan, China has infected over 40,000 people, mainly in China, and killed more than 900. It is still too early to judge how widespread an outbreak this will ultimately prove.
  • The impact is likely to exceed that of SARS in 2003. This reflects the greater size of China’s services sector and the country’s deeper integration in the global economy. Were SARS to be repeated now it would likely reduce global GDP growth by 0.25ppt, compared with 0.1ppt in 2003.
  • A prolonged outbreak in China over a couple of quarters would prompt a bigger global impact, estimated at around 0.5ppt. Global trade would increasingly be disrupted, undermining hopes for a post-trade-deal recovery, particularly in Europe.
  • A prolonged outbreak would also likely result in policy easing (monetary and fiscal) in China, and in close neighbours, including Singapore, Korea and Indonesia.
  • A sustained spread beyond China would significantly increase the global impact. An illustrative scenario with production shutdowns, travel restrictions and lost working days could deliver a global impact of 4-5ppt. This would result in global recession and would require policy responses in all jurisdictions.

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