BEIJING- A coronavirus outbreak in China which has killed 81 people and spread to many countries is expected to hurt its economy, an engine of global growth, though analysts say it is too early to quantify the overall impact on businesses and consumers.
The consensus is that in the short term, economic output will be hit as Chinese authorities step up preventive measures, impose travel restrictions and extend the Lunar New Year holidays to limit the spread of the virus.
Millions who usually travel during this period have cancelled their plans, with the government ordering that full refunds be provided to air and rail passengers
Shanghai said on Monday that companies cannot restart operations before Feb. 9, and businesses in the eastern Chinese manufacturing hub of Suzhou have been ordered to stay shut until at least Feb. 8.
The government has lengthened the week-long Lunar New Year holiday nationally by three days to Feb. 2.
Wuhan, a city of 11 million and the epicentre of the virus outbreak in central China, is already in virtual lockdown and severe limits on movement are in place in several other Chinese cities.
Many analysts are turning to Severe Acute Respiratory Syndrome (SARS), a coronavirus that originated in China and killed nearly 800 people globally in 2002 and 2003, to better understand the likely longer-term effects.
“The economy rebounded quickly after SARS faded away,” said Larry Hu of Macquarie Capital, in a note to clients. Transportation, restaurants and retail sales were hit, but Hu said on the whole SARS was “just a blip which didn’t change the big trend.”
This time, however, analysts say China’s increased reliance on consumption to drive the world’s second-biggest economy compared to early 2000s, could undermine growth.
“In China during 2019, consumption contributed about 3.5 percentage points to the overall real GDP growth rate of 6.1 percent. A back of the envelope calculation suggests that if spending on such services fell by 10 percent, overall GDP growth would fall by about 1.2 percentage points,” said analysts from S&P Global Ratings in a note.
The early data make for sober reading.
The usual Lunar New Year rush of spending on travel, tourism and entertainment is taking a beating already. Overall passenger travel declined by nearly 29 percent from a year earlier on the first day of the Lunar New Year, a transportation ministry official said.
With many cinemas closed, China’s theatres earned 1.81 million yuan ($262,166.86) from movie tickets on the first day of Lunar New Year, down more than 99 percent from the same day the previous year, according to data from Chinese movie-ticketing company Maoyan. – Reuters
