12 February 2020

Economic impact of the Coronavirus

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By Michael Rambaldini

Director | Certified Financial Planner |Aged Care Professional

When the 2019 NCOV hit Wuhan in China, everyone tried to contain the panic, the hysteria and the fear of the virus. However, the outbreak has now spread worldwide.

The World Health Organisation has monitored the casualties, the infected patients undergoing treatment and those countries that have confirmed cases.

It is still ongoing and the risks have doubled if not tripled in the last few days.

The impact in China has been immediate with 35 million people in lockdown. Airlines have halted flights to and from China and neighbouring countries. Hotels, casinos and entertainment establishments have closed down temporarily in an effort to avoid the risk of further infection.

This has prompted emergency actions from various government sectors and agencies, private companies and individuals.

The immediate economic impact will be felt by China with many factories and businesses closing their doors. However, the impact will also be felt by international companies that rely on Chinese factories to make their products and depend on Chinese consumers for sales.

Apple, Starbucks and Ikea have temporarily closed stores in China. Shopping malls are deserted, threatening sales of Nike sneakers, Under Armour clothing and McDonald’s hamburgers. Factories making cars for General Motors and Toyota are delaying production as they wait for workers to return from the Lunar New Year holiday, which has been extended by the government to halt the spread of the virus.

There have been previous pandemics such as SARS. After SARS, China suffered several months of economic contraction and then rebounded dramatically. That might also happen this time. However, China is more involved in the global supply chain which has a greater international impact.

No one knows how long the Coronavirus outbreak will last, how far it will spread, or how many lives it will claim. It’s impossible to calculate the extent to which it will disrupt China’s economy and because of its global involvement, the disruption to other countries.

Verante Pty Ltd is a Corporate Authorised Representative of Viridian Select Pty Ltd, ABN 41 621 447 345, AFSL 515762. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information consider its appropriateness, having regard to your objectives, financial situation and needs.