Coronavirus could cost world $1 trillion

The worrying prospect that the Covid-19 outbreak could become the first truly disruptive pandemic of the globalisation era is renewing doubts over the stability of the world economy. With the death toll approaching 3,000, over 80,000 cases officially recorded and an outbreak in Italy now shutting down the richest chunk of its economy, some economists are beginning to wargame what an untethered outbreak could mean for global growth.Oxford Economics reckons an international health crisis could be enough to wipe more than $1 trillion from global GDP. That would be the economic price tag for a spike in workplace absenteeism, lower productivity, sliding travel, disrupted supply chains and reduced trade and investment.Investors are already nervous, with US stock benchmarks slumping more than 3% on Monday and the S&P 500 Index dropping the most since February 2018.For now, central bankers and governments continue to bet that Covid-19 will not damage the world economy by much, and perhaps allow it to enjoy a rapid rebound once the illness fades. But that confidence is being tested.While the IMF currently reckons the virus will only force it to knock 0.1 percentage point off its 3.3% global growth forecast for 2020, IMF chief economist Gita Gopinath said in an interview that a pandemic declaration would risk “really downside, dire scenarios”.The WHO head called the new cases “deeply concerning,” but said the outbreak isn’t yet a pandemic.Still, the protracted shutdown of Chinese factories that were supposed to be back online and spread of the virus to South Korea, Iran and Italy’s industrial heartland raise the spectre of much greater death and disruption. The virus risks tipping Italy into a recession that could hurt the rest of Europe too.Korea’s economy is being buffered, with consumer confidence plunging the most in five years.How to assess the risk is complicated by doubt over how far Covid-19 will travel.

from Economic Times https://ift.tt/3a4xIwF