The COVID-19 coronavirus is spreading across the world. Initially the epicenter was China, with reported cases either in China or in travellers from China. There are now at least four further epicenters: Iran, Italy, Japan and South Korea.
Although the World Health Organisation believes the number of cases in China has peaked and should fall, case reports are climbing from countries previously thought to be resilient due to stronger medical standards and practices.
In a strongly connected and integrated world, the impacts of the disease will go beyond mortality (deaths) and morbidity (people incapacitated or caring for the incapacitated and unable to work).
Companies across the world, irrespective of size, depend on inputs from China – much more so than during the 2002-04 China-centred Severe Acute Respiratory Syndrome (SARS) pandemic.
In 2003 China accounted for less than one twentieth of world trade. It now accounts for one seventh, making it the world’s biggest importer and an integral part of most global production chains.
Just as important to the world economy, panic is distorting spending. Global stock markets have plunged.
Fear is as important as trade
Entire cities in China have closed and travel restrictions have been placed on people entering from infected countries.
The fear of an unknown deadly virus is similar in its psychological effects to the reaction to terrorism threats and produces a high level of stress, often with longer-term consequences.
A large number of people feel at-risk at the onset of a pandemic, even if their actual risk of dying is low.
The International Monetary Fund expects COVID-19 to knock 0.4 points off China’s economic growth target of 5.6% and 0.1 points off global growth, an assessment it will continue to update.
As part of a large research project in the Centre for Excellence in Population Ageing Research (CEPAR) at the Australian National University, we have applied experience gained from evaluating the impact of SARS for the World Health Organisation in 2003 and 2006 to seven scenarios for COVID-19:
- ^ World economy flashes red over coronavirus – with strange echoes of 1880s Yellow Peril hysteria (theconversation.com)
- ^ We're staring down the barrel of a technical recession as the coronavirus enters a new and dangerous phase (theconversation.com)
- ^ 0.5 points (www.oecd-ilibrary.org)
- ^ 2003 (www.lowyinstitute.org)
- ^ 2006 (cama.crawford.anu.edu.au)
- ^ seven scenarios (cama.crawford.anu.edu.au)
- ^ Source: McKibbin and Fernando, March 2020 (cama.crawford.anu.edu.au)
- ^ good hygiene practices (www.brookings.edu)
- ^ It's now a matter of when, not if, for Australia. This is how we're preparing for a jump in coronavirus cases (theconversation.com)
Authors: Warwick McKibbin, Chair in Public Policy, ANU Centre for Applied Macroeconomic Analysis (CAMA), Crawford School of Public Policy, Australian National University