From a medical and human point of view, the outbreak and rapid spread of the new corona virus in China and beyond its borders is certainly very regrettable and worrying. From an economic point of view, however, the damage should be limited at present. This should be due not least to the rigorous crackdown by the Chinese authorities and their – unlike during the SARS epidemic 17 years ago – almost astonishingly transparent information policy.
A comparison with the spread of SARS in the winter of 2002/03 and its economic consequences is, of course, obvious at present. At that time, consumption in China collapsed, and passenger air travel also declined significantly. In neighbouring Taiwan, Singapore and Hong Kong, economic output shrank. At that time, however, the Chinese authorities had kept information about the outbreak of the epidemic under wraps for as long as possible. During this time, the virus was able to spread unchecked in China and beyond its borders. When the authorities finally admitted the outbreak in March/April 2003, a good five months after the first appearance of the disease, the admission caused panic.
This is unlikely to happen again at present. The Chinese government’s move to effectively quarantine an entire conurbation, including the 11-million-strong metropolis of Wuhan and other neighbouring cities with millions of inhabitants, is radical, but should make a decisive contribution to containing the spread of the virus. Although the information provided by the authorities is still euphemistic by Western standards, it is entirely designed to prevent a panic like 17 years ago. Beijing’s early cooperation with the World Health Organisation (WHO) was an important signal in this respect. The WHO in turn classified the new corona virus as slightly less dangerous than the SARS virus at that time. At least for the time being, this also suggests that the current health crisis is developing less severely.
In addition, although the economic reactions were severe in the second quarter of 2003, most of them were already made up for in the following quarter. Neither in China nor in Taiwan, Singapore or Hong Kong was economic growth noticeably weaker in 2003 as a whole due to SARS. The same applies to the global economy. Only the aviation industry suffered longer from the consequences of the slump.
For the time being, we therefore see no reason to revise our growth forecasts downwards. However, the outbreak of the corona virus has added a new economic risk to the growth risks that have just been somewhat contained. This applies in particular to the possibility that the pathogen may turn out to be more dangerous than currently assumed. Many Chinese economic indicators will probably be temporarily weaker in the current quarter, with sentiment in particular likely to suffer. Under favourable conditions, however, the losses should be recouped in the following months. However, as we do not expect the trade agreement with the USA to provide any significant impetus for growth in the Chinese economy, we expect economic growth in 2020 to be slightly weaker than in the previous year anyway. After 6.1 percent last year, it should be 5.9 percent this year and 5.8 percent in 2021.