CORONA VIRUS OUTBREAK
An outbreak of a new virus called Corona Virus in China has sent shivers through world financial markets.
- The shares of long-haul flight operators retreated as news of the contagion raised concerns over disruptions to travel during a coming Chinese holiday.
- Investors around the world drawing comparisons to the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 in order to assess its potential economic impact.
- After China reported the SARS outbreak to the World Health Organization (WHO) in 2003, the MSCI China index of shares decoupled from its global peers but made up the lost ground in 6 months.
- A paper estimates the global economic loss due at SARS at $40 billion in 2003.
- A 2006 economic briefing by the International Air Transport Association (IATA) estimated that world GDP suffered a 0.1% hit due to the outbreak.
- A study in 2017 estimated that the expected annual losses from pandemic risk to be about 0.6% of global income per year. It accounts for both lost income and the intrinsic cost of elevated mortality.
- A study in 2016 estimated that pandemic disease events would cost the global economy over $6 trillion in the 21st century over $60 billion per year. This study was conducted by the commission on a Global Health Risk Framework for the future.
- Isolating the impact of a single factor on global stock indexes and the global economy is a difficult task. They reflect a multiplicity of simultaneously competing factors ranging from economic data, company performance and geopolitics shifts.
- Recently, an IMF paper notes that even when the health impact of an outbreak is relatively limited, economic consequences can be quickly magnified.
- The authors cite the case of Liberia during the 2014 Ebola outbreak, which saw GDP growth decline even as the country’s overall death rate fell over the same period.
- The mortality rate is what that scared people about SARS.
- The impact from the disease was massive on the economy, but almost all of it indirect, due to the precautionary behavior of the population.