New Virus and the Future of the Global Economy

The world’s second-largest economy is struggling to contain the virus that already killed more than 20 people. This is a serious challenge not only for China but for other countries as well. The World Health Organization described the situation as an emergency for China. However, the organization did not call it an emergency for the world. The new virus will have economic consequences. It may even affect the global economy.

One of the options is to compare the current situation with the outbreak of severe acute respiratory syndrome (Sars). The outbreak of that virus also began in China in 2002-2003.

Coronavirus already inflicted some economic damage in China. People should take into consideration that the outbreak of the virus coincided with Lunar New Year.

Chinese officials-imposed travel restrictions in parts of the country. This brings us to the problem connected with transportation. It is important to note that, Wuhan the city where it began, is an important transport hub.

Companies will struggle to move people and products due to travel restrictions. Thus, industrial supply chains will have to deal with the side effect of this outbreak. Moreover, some deliveries will be disrupted and in other cases, the price of the products may rise as a response to mounting transportation costs.

There are other issues as well that may affect China and the global economy in general. This problem relates to the recovery rate. For example, money private and public health insurers will have to spend to care for the patients. Additionally, a similar situation may arise outside of China if there outbreaks of the new virus. However, on a much smaller scale.

The global economy and other challenges

Another challenge is to develop a vaccine to tackle the spread of the virus in the future. Paul Stoffels who is a chief scientific officer at Johnson & Johnson commented on this issue. According to Stoffels, his team already completed the basic work on a vaccine. Based on the preliminary information, it will become available in about a year.

The negative impact on stock markets in China is not a serious problem. For instance, as of January 26, the Shanghai Composite index was higher than it was six months ago.

Moreover, shares in Chinese companies that are manufacturing items such as drugs and protective equipment increased during the outbreak.

In the long run, drug makers might be able to introduce a vaccine against the virus. On the one hand, they will save many lives and on the other hand, they earn money by selling this vaccine to various organizations.

It is very hard to suggest how this virus would affect the global economy. However, based on previous experience, it is possible to more or less analyze the situation. One estimate suggested a cost to the global economy of $40 billion. We are talking about Sars and its influence on the economy.

As in the case of Sars, it will be tough to provide an exact price. However, the Chinese, as well as the international society, had the time to learn from that outbreak.