Two thousand people have died from the novel Coronavirus (Covid-19), which broke out in the Chinese city of Wuhan, late December 2019. With over 77,000 confirmed cases in 27 countries across the globe, the effects are being felt worldwide — from supply chains to price of crude oil and copper and global stock prices tumbling.
The global markets initially reacted as though this was China’s problem only, with the major financial markets experiencing record highs, but as the infection rate and death toll climbed, a true picture of the effects of the novel coronavirus began to emerge.
Unlike the SARS outbreak of 2003, where China only played a minor role in the world economy, China is now the second-largest economy in the world, intertwined in every major supply chain, and the large consumer of commodities such as crude oil and copper. The outbreak has grounded the Chinese economy to a halt, causing ripple effects in various sectors.
The tourism sector, which may be the most affected sector of them all, reported serious losses; the International Air Transport Association (IATA), the trade body for the global airline industry, warned last week that falling passenger demand would cost the airline industry $29.3billion in lost revenues this year.
Countries heavily dependent on Chinese tourists like Thailand, which has Chinese tourists making up 4% of its GDP, are preparing to see a substantial decrease in revenue from their tourism sector.
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The global supply chain is also under strain, with many factories in China either closed or producing below capacity. This has decreased the country’s manufacturing revenue, which has not just affected China alone; companies like Hyundai in South Korea and Jaguar Land Rover in Britain have stalled operations due to shortage of parts.
Smartphone maker, Apple has notified investors that it might fail to meet its quarterly revenue of $65 billion because of the temporarily constrained supply of iPhones from their Foxconn factory and a decrease in Chinese buyers due to the outbreak.
Retail sales have also declined, with most retailers closing their stores or shortening working hours, while most consumers prefer to remain indoors to avoid infection.
Commodities like crude oil and copper have seen a decrease in demand since the outbreak began, with crude oil having a 2% decline, trading $51 per barrel, while safe haven assets like gold and silver have gained from the uncertainty of the virus becoming a global pandemic; gold is trading at a 7-year high, with a price of $1680/oz.
The extent to which the outbreak will affect the global economy is still unknown but investors in various markets are beginning to realize that the outbreak may fast become a global crisis, with stocks in major financial markets closing at lower prices.