Will the Coronavirus Cause a Global Recession?

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Wuhan coronavirus continues to spread at an alarming rate. It's devastating new disease will lead to a global recession? | Credit: Dale De La Rey / AFP

  • Wuhan coronavirus outbreak continues to escalate. And the Chinese authorities may be to minimize its severity.
  • The virus presents a huge risk to the world economy. But markets seem indifferent U.S.
  • China has grown into a massive part of the global economy. When it sneezes, the world catches the coronavirus.

    When the United States sneezes, the world catches a cold. This is how the old saying went. And his logic was simple. As larger and more complex in the world economy, all economies was so intertwined with the United States could not avoid the consequences of an economic calamity within its borders.

    But what happens when China catches a cold? Or better yet, when a rapidly spreading disease and high lethality is caught?

    The coronavirus Wuhan could potentially have a disastrous effect on the world economy. Even if the virus does not grow to become a global pandemic, the economic consequences can be enough to cause a recession in China, data from the World Bank suggests. This can lead to a domino effect leading to a global slowdown. Coronavirus outbreak escalates

    From the latest data, the Wuhan coronavirus has grown to infect nearly 38,000 people with 813 deaths. Most fatalities are in mainland China, with 780 recorded in Hubei province alone. Chinese authorities have instituted broad and draconian measures to combat the crisis, such as travel restrictions, quarantines mass throughout the city, and suspension of business operations.

    But perhaps most troubling is that the outside world does not know whether China is being completely accurate with their numbers.

    The magnitude of the response of the government along with their attempts to freedom of expression censorship in Wuhan suggest that the outbreak could be much worse than the authorities are reporting. Independent research of the medical journal The Lancet suggests that the coronavirus may already have infected more than 75,000 people. Hong Kong researchers painted an end view of the situation, suggesting that the virus could grow to infect 150,000 people a day.

    Gabriel Leung, professor of medicine at the University of Hong Kong, provides as follows:

    The apparent discrepancy between our estimates based on models from 2019-nCoV infections and the actual number of confirmed cases in Wuhan could also be due to several other factors. These include that there is a time lag between infection and the onset of symptoms, delays in infected people who come to health care, and the time required for cases confirmed by laboratory tests. economic impact and feel

    The oil prices have fallen for five consecutive weeks due to Chinese demand for transport which is suppressed due to the crisis. And major US companies like Starbucks (NYSE: SBUX) and the alphabet (NASDAQ: GOOGL) are scaling back operations. Foxconn, the maker (NASDAQ: AAPL) Apple. IPhone, was prevented from re-open its plants - a move that was scheduled to begin on Monday

    However, US stock markets remain remarkably nonchalant about the coronavirus, despite their stock prices negative actions obvious impact.The Apple and Tesla, two companies with significant exposure to China have increased significantly in the following weeks of the start of the outbreak. Source: ycharts.comExperts Suggest a major economic shock is inevitable

    U.S markets are too optimistic a hard awakening. The US economy has been intertwined with China, and an economic crisis in a nation harm the other. If the crisis continues to worsen, a global recession is a real possibility.

    Accounts China's economy staggering 16% of the world economy. And when coughing, the world is sick.

    According to a study by the World Bank, a major global pandemic could eliminate up to 5% of global GDP - a sum that is more than $ 3 trillion. They value the potential impact with a world war.

    The report indicated the following:

    Respiratory infections such as influenza are often highly transmissible (it is easy for an infected person to transmit the pathogen to several other people in a short space of time) so they can spread quickly; if they are also sufficiently virulent, they pose a formidable threat. A severe pandemic would resemble a world war in the sudden, deep and widespread impact.

    While the coronavirus Wuhan has not become a pandemic, however, the world economy is not prepared to deal with economic shocks of this magnitude.

    China's economy was in unstable equilibrium, even before the outbreak. The country already drowning in debt. According to the International Institute of Finance, the country's debt exceeded 300% of GDP in 2019 - this compared to about 106% in the US .

    China also has multiple speculative bubbles in everything from real estate to bonds.The provincial coronavirus can be the catalyst that sends this house of cards falling down.

    The views expressed in this article do not necessarily reflect the views of CCN.com.



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