How Much Will the Coronavirus Outbreak Impact Global Economy?

While the death toll from the Wuhan coronavirus outbreak continues to climb, in many patients the illness amounts to only a cold. Now, something else appears to be going “cold”; the global economy could be taking a nosedive.

Initially, it seemed the outbreak would mostly impact China’s output – which would be concerning enough. But now, with the outbreak reaching every country in the world and impacting some of the largest economies, it is clear that the monetary impact of the virus will become a worldwide problem.

How big of a problem are we expecting? Some analysts estimate the cost of the outbreak to be around 1.1 trillion dollars. That figure would amount to 1.3 percent of expected global growth this year.

A snowball effect. At first, factory closures in China simply meant that factories in other countries needed to pick up the slack. But as the problem grows beyond China, the trouble in manufacturing is no longer an “Asian” problem. Without steady supplies, factories in other countries can’t meet production quotas. That means retailers won’t receive shipments, and the end result is that sales will fall.

Beyond factories. It’s not only factory closings that generate concern. Schools in Japan have shut down for two weeks in an effort to contain the outbreak. That decision could set off a chain reaction of slowed economic activity, with the country set to host the 2020 Olympics this summer.

Impact on the US economy. With production recently slowed and travel bans going into effect, we’ve yet to see the full impact of coronavirus upon the US economy. Experts predict that the impact will peak this summer, and that we’ll see between 100,000 and 150,000 total cases of the virus, worldwide. Analysts predict a “moderate” impact here, based on those numbers.

The tourism industry alone might see about 5.8 billion dollars in losses, mostly due to reduced Chinese visitors. The stock market might drop an estimated 5 percent, but could very well rebound by the end of the year.

On the other hand, if the outbreak grows larger than expected, impacts would grow proportionately. In the worst case scenario (which is also unlikely) the US could face a recession.

We’ll keep you updated on this situation as it develops, but keep in mind that worst-case scenarios are also the least likely to actually transpire. In the meantime, give us a call if you have any other concerns about financial planning.