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Is the Coronavirus Outbreak Affecting the Global Economy?

The outbreak of the coronavirus has claimed over 560 lives in China, at the time of writing. Yet, many financial analysts are also beginning to worry about the economic impact of this disease. Is it having a negative effect on the worldwide economy?

Tourism Has Been Badly Hit

Perhaps the most obvious effect has been in the tourism industry. With the number of Chinese tourists growing in recent years, the sudden and dramatic drop in their numbers has been noticeable. 150 million Chinese tourists travelled the world in 2018, up from around 10.5 million at the start of the century.

Japan is expected to be most badly hit, as their visitors from China make up 40% of the overall amount spent by tourists in the country. Thailand is another country that relies upon visitors from their neighbour. The UK has also received a growing number of Chinese tourists in the last few years.

Cruise companies have cancelled trips to this part of Asia. Airlines have stopped flights and some have asked their staff to take a holiday. Meanwhile, hotels and restaurants are among the other types of business that have suffered as a consequence of the coronavirus. 

The Global Supply Chain Has Been Disrupted

China is a hugely important part of the global supply chain. Products and parts are made here for numerous multi-national companies. 

Among the firms that have had to stop production in the country are car makers like Volkswagen, Honda, Toyota and General Motors. This could have a knock-on effect and cause more businesses to look into the debt collection process in order to survive.

Airbus has also put a temporary halt to its production line in China, as has Apple. Even companies that don’t operate here have been affected. For example, Hyundai has had to stop working in South Korea because parts from China are no longer getting made.

Global Companies Operating in the Chinese Market Suffer

Some of the biggest names in the business world earn significant sums in China but are currently losing money there. Disney bosses have spoken about losing £216 million after having to close a couple of busy theme parks.

Retail has also been badly hit. For example H&M, Adidas, Hugo Boss and Nike have all been forced to close stores. Ikea has shut down all 30 Chinese outlets, Starbucks only has half its cafes open and McDonalds has closed 300 locals.

Interestingly, the European stock market has rallied strongly in the last few days. It even reached a record high at one point. Asian stock markets fell heavily and have only bounced back slightly so far.

Some estimates suggest that the economy in China will only show 4% growth for the first three months of 2020, and 5.6% for the full year. This compares to a forecast of 6% before the virus appeared.

Predictions for the global economy give a 0.2% drop in the expected growth. However, with the coronavirus outbreak still running its course, these figures will need to be revised at a later date.