For Mark Roberts’ Use: With the death toll from the coronavirus outbreak now reaching nearly 3,000, public health officials are releasing a variety of warnings to help us prepare for the potential impact. But aside from washing your hands and eating a healthy diet to avoid infection, you might also be wondering about the financial impact of the looming epidemic.
First, it is important to remember that while tragic, 3,000 deaths out of a population of 9 billion should not necessarily trigger panic. The virus has now infected over 83,000 people, but most of them recover quickly and without serious complications. So while it is unlikely that this particular strain of coronavirus will trigger an apocalyptic situation regarding our population, the preparations the precautions many governments are making will definitely impact their economies in some way.
Production slowed in China. The initial impact of quarantines and factory closings in China has triggered a production shortage that is now reaching into economies worldwide. Factories in other countries are now running short of basic necessities, and shipments to stores are late.
Schools closed in Japan. Japan’s government made the surprising decision to close all of its public schools for several weeks. No doubt worried about the Tokyo Olympics scheduled for this summer, their public health officials are scrambling to contain the outbreak. Of course, school closings do trigger a chain reaction throughout the economy, with parents potentially calling out of work and other economic impacts expected.
Impact upon US economy. Experts predict about 5.8 billion dollars of losses from the tourism industry alone, due to halted visitation from China. Effects upon other industries will vary, with the stock market expected to drop a projected 5 percent before rebounding later this year. Fortunately, analysts say that a recession would occur only in the “worst case” scenarios, which are unlikely to transpire.
Impact upon global economy. Overall the projected losses to the global economy total 1.1 trillion dollars. That would amount to about 1.3 percent of global growth for the year.
Looking at these numbers, it is clear that we do face a challenge ahead. However, any predictions of outright doomsday scenarios are likely to be significant exaggerations. Give us a call if you have any questions, and let’s stay in touch regarding your financial planning.