LONDON (Reuters) - Travel and trade restrictions introduced to control the spread of the coronavirus from China are now expected to deliver a short, sharp blow to both Chinese and global economic activity for the first quarter of this year.
While it remains unclear how far the virus will spread and when it will peak, economists are already trying to estimate the impact on gross domestic product in the world’s second-largest economy and beyond.
Deaths linked to the virus rose to 427, and the health scare has been declared a global emergency by the World Health Organization after it was detected in 24 other countries and territories.
“To stay in the benign scenario, we really need to see the reproduction rate taper off significantly this week,” said Christian Keller, head of economics research at Barclays.
His team calculates that - depending on the severity of the impact on China - the impact on the world economy could range from almost no change to his current global growth forecast of 3.3% for 2020 to sub-3% growth in the worst case.
“There is a risk that an adverse feedback mechanism and limited space for policy response could push the global economy towards recession,” he added, using the reference rate of global growth dipping below 2.5% as the threshold.
Many analysts model the latest events on previous outbreaks such as Severe Acute Respiratory Syndrome (SARS) that killed hundreds in 2002-2003. But historical comparisons are clouded by other parallel events and because China’s contribution to global GDP has quadrupled since then.
“If the outbreak broadly follows historical patterns, it will peak and fade in 2Q,” JPMorgan economist Joseph Lupton told clients, predicting global growth would lose about 0.3 percentage point in Q1 to an annualised 2.3% before bouncing back in the second quarter.
Robin Xing at Morgan Stanley estimated last week that if the situation extended to 3 to 4 months, global growth “could be further impacted by about 0.2-0.4ppt in 2Q20,” he said.
Reporting by Karin Strohecker; graphic by Ritvik Carvalho, Editing by Angus MacSwan