How will Coronavirus affect the global economy?

Coronavirus spread has raised a lot of questions in terms of the effects it might have on the world economy. Let’s start by analysing the immediate effects the virus is having in the origin of its outbreak. China’s economy is taking a strong hit as Wuhan and other parts of Hubei province are on lockdown which prevents any type of business related travel, transport of goods or movement of workers. Moreover, people in China are trying to avoid their day to day activities that might expose them to the risk of infection. This has had a major impact not only in the small businesses such as private owned shops or restaurant, but hotels, airlines, casinos and cruise operators were among the industries suffering the most immediate repercussions. So how can the virus lead to a significant global impact? The current size of the outbreak would not cause a major impact in the world economy, at least not a long term one. However, if the virus is not contained soon, there will be consequences especially in tourism across Asia, oil market, and commodities market. The virus has already affected tourism in many Asian countries. The Tourism Council of Thailand has estimated a cost of over 1.5 million USD in lost tourism income for Thailand’s economy due to China’s blanket ban on tourists leaving its affected cities. If the outbreak gets larger, it could have spill over effects on other Asian countries economies which will inevitably affect the rest of the world. The Oil market has already been hugely affected as oil prices have slumped in response to the spread of the virus in China, the world’s largest oil importer, leading OPEC to reduce their current output, as well as consider deeper cuts if oil demand is badly hit. As for the commodity market, a fall in Chinese industrial production will reduce the demand for metals such as steel, copper etc. Gold on the other hand, has won some support during this time of uncertainty, hitting a three week high which was obviously expected. Gold is a one of the more simplistic poor man’s indicators. (i.e: gold goes up when people think the economy is going down).

What will the outcome of all this be? Only time will tell. Everything I’ve written above, and everything you read on the news, is simply a prophecy. The only thing we can do right now is hope for the best, cover our faces when we cough or sneeze, and wash our hands regularly.