BOSTON/WASHINGTON: The coronavirus that spread from a seafood market in Wuhan, China to infect tens of thousands has shuttered businesses, grounded flights and killed over 1,000 people so far, mostly in China.
As the world’s second-largest economy struggles to get back to work after an extended Lunar New Year holiday, analysts and bankers have been revisiting their estimates of the economic impact of the virus.
Most believe China faces a short but sharper economic shock than originally thought, one that will be felt around the world. Expectations of how harsh the impact will be varying widely, however. Health professionals and economists say opaque Chinese data and lack of precedent hinder clear estimates.
China’s gross domestic product growth in the first quarter could fall to as low as 4 per cent, Nicholas R. Lardy, senior fellow at the Peterson Institute for International Economics, estimated on Tuesday. That compares to Chinese government estimates of 6 per cent annual growth before the virus emerged.
However, if the number of confirmed new coronavirus cases continues to decline, then adverse effect on annual growth will be much smaller, he added.
Analysts from S&P, meanwhile, estimated on Tuesday that the virus could lower China’s GDP growth to 5.0 per cent this year, with a peak effect in the first quarter before a rebound begins in the third quarter.
“The numbers are very imperfect, and that’s the basic reason behind the wide range of estimates,” said Lardy. “Everyone is guessing.”
Many economists and analysts are looking closely at the historical precedent from the SARS virus spread in 2003. But when SARS struck, China’s contribution to global GDP was just 4 per cent, compared with 15 per cent in 2017, and Chinese companies were much less integrated into global supply chains.
Any forecasts are also complicated by the fact that Beijing has a history of closely managing China’s economy to hit specific targets, and there were already doubts whether China’s economy could reach 6 per cent growth this year.
Further, much remains unknown about the coronavirus, including its exact incubation period and the effectiveness of China’s quarantine measures, Catherine Troisi, a University of Texas public health specialist, said on Tuesday during a National Association for Business Economics call on the virus’s economic impact.
The authoritarian nature of China’s government could also hinder the response by making officials afraid to report problems, she said. — Reuters
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