|A man wearing a protective face mask walks in a deserted shopping area in Beijing. (Photo: Greg Baker/AFP via Getty Images)
From China’s Hubei province the COVID-19 epidemic has spread to more than 100 countries and territories. It has broken the global supply chain because China is a major supplier of many countries and international groups.
The electronics, automobile, garments, textiles, and footwear sectors are under enormous pressure. The tourism, service, and aviation sectors have plunged due to travel restrictions.
Global economic growth forecast to sink
Global economic growth is expected to fall sharply in the first quarter of this year. Bloomberg predicts the impact of COVID-19 on the global economy could be 3 to 4 times that of SARS causing losses of about US$160 billion.
Weeks ago economists were optimistic that China, the world’s second biggest economy, would rebound strongly once the COVID-19 epidemic was under control, but their optimism has faded as hundreds of thousands of factories in China remain closed, millions of workers remain at home, supply chains are breaking down, and tourism and trade are becoming paralyzed.
The International Monetary Fund (IMF) says the COVID-19 epidemic has undermined the global economy’s fragile recovery, which is down 0.1% from last October’s forecast.
Bank of America Global Research predicts that global GDP growth could fall to 2.8% this year, which would be the first sub -3% reading since the end of the financial crisis in the second quarter of 2009. Oxford Economics, a leading global economic forecaster and analyst, said the novel coronavirus could cost the global economy more than US$1.1 trillion in lost output, equivalent to 1.3% of the global GDP.
Big economies shaking
Bloomberg Economics says the epidemic could cause losses that even big economies are unable to bear. China’s GDP growth in the first quarter will slide to 1.2%. The EU will record low economic growth. The US stock market will dive 40% to 50%.
Japan saw higher trade deficits in the first two months of this year, while the Consumer Confidence Index dropped to the lowest level in years. If the epidemic continues until the Tokyo Olympics, it will cause a massive loss to the Japanese economy. The Republic of Korea has seen a sharp decrease in trade.
The Chinese Central Bank injected huge amounts of money into the market in February. The European Central Bank is maintaining a negative interest rate. The Republic of Korea, Malaysia, and Vietnam have introduced emergency policies to prop up businesses.
The Bank of Japan has allocated US$4.6 billion to ensure liquidity in the banking sector. The Republic of Korea is giving loans to small and medium-sized enterprises to pay their employees. Italy is offering credit to companies that have suffered 25% losses.