Global Economy: Is this coronavirus riskier than SARS?

By: |
January 30, 2020 2:16 AM

China has acted fast by restricting movements of its people, particularly from Wuhan city and the Hubei province.

The World Health Organisation (WHO) is yet to declare the virus as a global public health emergency with international concern.

The coronavirus originating from the city of Wuhan in the Hubei province of China is spreading fast across the world. The risks from the contagion are no longer confined to China. They are beginning to affect several countries in the Asia-Pacific region—including Thailand, Singapore, Vietnam, Malaysia and Australia—and are also crossing the Atlantic and the Pacific to surface in the US and Europe.

The World Health Organisation (WHO) is yet to declare the virus as a global public health emergency with international concern. Pandemics that have been declared such by the WHO in the past include the Ebola, the Zika and the swine flu. However, it has upgraded its initial alerts to categorise the risks as ‘very high’ for China and ‘high’ for the region and the world.

This is probably as close as the global health body can get to in describing an outbreak as serious. Reports suggest that the WHO’s deciding body was vertically split in declaring the virus as a global public health risk. But the very fact it came back to revise upward its initial assessment reflects the mounting concerns as more and more countries report confirmed cases and the death toll rises in China. In fact, there are possibilities of the coronavirus not just becoming a major medical problem, but also one with serious economic repercussions.

The coronavirus was preceded by the outbreak of the SARS (severe acute respiratory syndrome) in 2003. Both the viruses are from the same family, with largely identical symptoms. The current coronavirus though, some suspect, might have stronger long-term impacts, given its strength during incubation. The SARS, which had also originated from China and had seriously affected the entire region claiming more than 700 lives from across the Asia-Pacific, had hit countries that were unprepared for the contagion. Today, the region, as well as the rest of the world, is clearly much better prepared to handle the disease. Countries, including India, have responded vigorously to early-warning signals. While preparedness is certainly a relief, there are other changes that have happened in the world and which continue to generate worries.

The source of the pandemic is China again, as it was during the SARS. The difference, however, is that the China of 2020 is not comparable with the China of 2003. China’s GDP was $1.6 trillion in 2003. Today, it is nearly nine times larger, with a GDP of $14.3 trillion. The country’s per capita GDP has increased from around $1,300 to more than $10,000 today. China has become larger and richer as an economy, as have its people. Needless to say, the country has become far more globalised as well during this period. One of the biggest reflectors of China’s globalisation is its movement of people, as can be seen from its tourism.

China received around 141 million tourists in 2018. At the same time, almost 150 million tourists travelled abroad. The bulk of tourists travelling to China were from Asia, followed by Europe and the US. India was also one of the sources of tourists for China. On the other hand, Chinese tourists travelled mostly to other countries in Asia, followed by Russia and the US. Southeast Asian countries—including Thailand, Vietnam, Indonesia, Malaysia, Singapore and the Philippines—are amongst the most prominent ‘destinations’ as well as ‘source’ countries for tourists for China.

People-to-people movement is arguably the biggest medium for transmission of any epidemic. Given China’s massive presence in the global tourism ecosystem of today, the risks from the epidemic are clearly more serious and severe than that of the SARS in 2003. While the movement of people from, and to China, would be as closely monitored as possible, it is not possible to eliminate all the risks. And certainly not just by screening flights arriving from China. It is quite possible that the potentially infected include those from other countries who have travelled to China at some stage in the recent past, and from there travel to other countries through multiple transits. This is particularly true for business visitors travelling across the length and breadth of not just the Asia-Pacific region, but across continents.

The first round of economic hits would be taken by the tourism and travel industry, as flights, hotels and related cancellations pile up. China business means a lot for many in the travel business today, including airlines from India, which run daily packed flights to and from China.

However, the developments might bring some good news for the insurance industry, as many service providers might rush for innovative products. Overall, however, the ramifications for the travel and hospitality industry are likely to significantly affect economic prospects of many countries. These are particularly true for countries in the region dependent on tourism, particularly Chinese tourists. Smaller countries such as Nepal, Bhutan, Myanmar, Laos and Cambodia, and even those like Vietnam and the Philippines, might lack the necessary infrastructure for screening arrivals.

China has acted fast by restricting movements of its people, particularly from Wuhan city and the Hubei province. However, at a larger level of global economic impact, the contraction in economic activity within China is going to affect global prospects. China was back to being the fastest-growing major economy at 6%, after India’s GDP growth decelerated. It might well be in line for a sharp reduction in GDP growth. The resultant effect on the global economy won’t be encouraging.

China’s sustained economic expansion has largely brought good news for the world economy. The coronavirus might be the first major opportunity to display the reverse.

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