Coronavirus in China
Potential Economic Impact
AKM Mohsin :
The Wuhan coronavirus epidemic began when people exposed to an unknown source at a seafood market in Wuhan began falling ill in early December. Cases remained below 50 to 60 in total until around January 20, when numbers surged.It is too early to quantify the potential impact of the coronavirus on China. Abundant can rely upon the attack and case fatality rates of the virus.Any economic punches are felt most by industries exposed to house defrayal, particularly activities that activities that take place outside the home.
Risk aversion and tighter monetary conditions might amplify the impact, as well as on investment. Whereas according cases are focused in urban center, the city's standing as a key transport, logistics, and motor vehicle production hub complicates matters. The coronavirus that initial emerged within the town of urban center, China, might have an effect on growth in China and therefore the remainder of Asia-Pacific. At this time, uncertainty regarding the character of the virus is thus high that it renders quantitative assessments empty. However, it's going to be useful to suppose through however the virus might have an effect on the economy and therefore the impact of earlier episodes of pandemics.
The number of new coronavirus cases has topped 5,000 in China in just about a month, data Tuesday showed, while it took more than 6 months for the number of SARS cases in the country to reach that figure.The severity of the impact of the coronavirus will depend upon the attack rate (the proportion of the population that falls ill) and the case fatality rate (the proportion of deaths). New conditions are often compared to previous flu-related pandemics, of which the most commonly cited are the Spanish flu of 1918-1920, the Asian flu of 1957-1958, the Hong Kong flu of 1968-1969, the severe acute respiratory syndrome (SARS) of 2003, and the avian flu of 2004-2006. The attack and fatality rates, measured at the global level, vary widely across these episodes reflecting the nature of the condition and the speed with which vaccines can be produced. The Spanish flu was the most severe, but experts generally agree that more recent episodes, up until SARS, have seen attack rates of 25%-30% and case fatality rates of less than 0.2%. For SARS and episodes thereafter, including the avian flu, the attack rates have been much lower, well below 0.1%, and concentrated in certain regions. However, in these episodes, case fatality rates were higher, in the 10%-20% range. Health authorities indicate it may be too early to assess these statistics for the new coronavirus.The coronavirus is hitting China during Lunar New Year, a period when households tend to spend more on travel, entertainment, and gifts. Even if the virus is contained fairly quickly, the initial stages of high uncertainty are likely to affect spending. While centered in Wuhan, other large population centers including major tier-one cities have begun reporting cases. No two viral incidents are the same but the typical lag between infection and symptoms may be enough to deter consumers from venturing outside. We may see some moderate downward pressure on retail sales, which have been steady but unspectacular. To give a sense of how big the effects could be, consider that consumption contributed about 3.5 percentage points to China's overall real GDP growth rate of 6.1% in 2019. A back of the envelope calculation suggests that if spending on such services fell by 10%, overall GDP growth would fall by about 1.2 percentage points. This assumes that consumers allocate about 20% of their spending on discretionary transport and entertainment (based loosely on the household survey). The supply-side impact, stemming from fewer people going to work, may be limited to the Wuhan area so long as the recorded cases remain concentrated in the city's immediate vicinity. Recent estimates indicate that Wuhan is China's sixth-largest city, with a population of about 11 million. It accounts for about 1.6% of national GDP. The most important short-term impact will be felt on travel and tourism. Tourism receipts in the region could fall as people curtail their travel plans in response to heightened health risks.
The countries in the region that have large tourism sectors and would therefore have a relatively larger impact include Thailand, Australia, and Vietnam. In Thailand, for example, tourism exports are about 11% of GDP. Tourists from China also represent a large proportion of arrivals for these economies, particularly for Thailand and Vietnam, where more than 25% of arrivals are from China.
(Writer is a PhD researcher of Political Economy,
Shaanxi Normal University, China