Economics / March 2020

“Not If . . . but When”—Impact of Coronavirus

Malaysian emergency responders screen a passenger flight arriving from Wuhan, China, February 26, 2020.

The current spread of a respiratory disease caused by a new (novel) coronavirus is first of all a global public-health crisis and a tragedy for those most closely affected. As of March 5, already more than 3,300 people have died from the infectious disease, mostly in China. The impacts of the outbreak of COVID-19 (short for coronavirus disease 2019) also are being felt throughout the world economy. Chinese manufacturing plays a central role in “global supply chains”—networks that companies use in the production and distribution of goods. The shutdown of Chinese factories because of the COVID-19 outbreak and restrictions on air travel to and from China already are disrupting supply chains.

Fears of a global epidemic also contributed to steep drops in stock prices in the United States and worldwide. In the last week of February, U.S. stock exchanges experienced their worst one-week losses since the 2007–8 financial crisis. Expectations of a further economic downturn will surely heighten if the epidemic continues to worsen and spread. Besides disrupted supply chains and upended stock markets, there are additional economic impacts: for example, labor shortages, as workers are quarantined or unable to work because of store closures; and slowed economic activity due to government restrictions on travel or assembly. Specific industries such as hospitality and tourism will face losses, as international sports events and business conferences are canceled or postponed. Just how dependent the global economy has become on China is becoming painfully apparent.

Since first emerging in and around the city of Wuhan, Hubei Province, in central-east China, the coronavirus has spread to many cities and areas of China, as well as to countries across the globe. Besides China, the most cases are in South Korea, Italy, and Iran. The outbreaks in Iran and Italy underscore the key role that air travel plays in spreading infectious diseases.

In late February, a Centers for Disease Control and Prevention (CDC) official, in explaining the outbreak’s impact on the United States, said it was “not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen.” By the first week of March, about a dozen deaths had occurred in the United States, mostly in Washington State.

Image credit: © Khairunnizam/Shutterstock

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