ASSESSMENTS

The Fuzzy Math of Projecting the Coronavirus' Economic Impact

undefined and Stratfor Senior Analyst for Global Economics at RANE
Michael Monderer
Stratfor Senior Analyst for Global Economics at RANE, Stratfor

Feb 25, 2020 | 10:30 GMT

This photo illustration displays currencies of China, the European Union and the United States.

The chief factor in forecasting the coronavirus outbreak's effects on the global economy will be how quickly the virus can be contained.

(yingko/Shutterstock)

Highlights

  • China is a major driver of global economic growth, contributing one-third to already sluggish GDP growth in 2019, and is bearing the brunt of the coronavirus impact so far in an effort to prevent global disease spread.
  • Estimates of global economic losses that extrapolate from the outbreak's immediate impact on China do not account for a possible prolonged epidemic, potential extended disruption of global supply chains or the uncertainties that deter investment.

Several weeks into the outbreak of the COVID-19 coronavirus that originated in Wuhan, Hubei Province, China, it's clear the economic impact will be significant, even if just temporary. After all, it's not possible to shut down a large portion of the world's second-largest economy without directly affecting global growth, including subsequent spillovers to other countries from China's global integration. Current projections of monetary losses seem to be derived from the impact of the 2003 SARS epidemic, scaled to changes in the size of China's economy, plus attempts to account for China's increased trade linkages and greater weight in world trade. What's significantly different now is China's integration into global supply chains, including as a supplier of intermediate inputs used in final production....

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