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Coronavirus economic hit could exceed $1 trillion

Coronavirus quarantines sparks global fears

As the coronavirus outbreak widens, a range of technology, apparel and other companies say the mass epidemic and public lockdown in China is hurting their sales. But that could be only the beginning of the economic fallout, experts warn.

Worldwide economic growth could plunge more than $1 trillion if the virus, officially known as COVID-19, continues to spread and becomes a global pandemic, according to Oxford Economics. 

As of Wednesday morning, more than 75,000 people were infected with the virus, while the death toll topped 2,000. The vast majority of cases are in China, although a new cluster of cases has emerged in South Korea.

The outbreak has already had "a significant chilling effect on growth in China," trimming the country's annual growth forecast to 5.4%, down from 6% prior to the epidemic, Oxford economists Adam Slater and Neil Walker said in a report.

"But what happens if the virus spreads much more widely, becoming a pandemic?" they asked. 

Their answer: If the outbreak expands beyond China but is largely confined to Asia, the impact could shave global GDP by 0.5%, or about $400 billion. But if COVID-19 expands beyond Asia and takes root in other countries, global growth would fall $1.1 trillion, or about 1.3%, the research firm estimates. 

What can past infectious disease outbreaks teach us about the coronavirus?

Economists are basing their forecasts partly on the economic impact of the Severe Acute Respiratory Syndrome epidemic, which lasted for nine months from late 2002 until the summer of 2003. In that incident SARS lowered China's growth by 1 to 2 percentage points, analysts calculate. 

But much has changed since then, including a boom in China's consumer economy a new wave of Chinese tourism around the globe. And already, the death toll from the coronavirus has topped that of SARS epidemic, which is blamed for about 800 deaths. That means the coronavirus's economic toll could be significantly larger.

Adidas and Puma

U.S. and other multinationals are starting to issue warnings about the impact of the disease, with Apple on Monday disclosing that it won't meet its financial guidance for the current quarter because of the outbreak, which has forced it to cut production of iPhones and quashed consumer spending in China.

On Wednesday, athletic-wear companies Adidas and Puma warned that the virus was hurting their operations due to store closures in China and fewer Chinese tourists shopping in other countries, according to Reuters. 

How the coronavirus is impacting the global economy

Meanwhile, Wall Street analysts are expressing concern that COVID-19 could cause serious economic damage beyond China.

"Consensus is that this coronavirus outbreak (COVID-19) is going to get worse before it gets better," Raymond James analysts said Tuesday in highly pessimistic note to investors. "It seems as though the market is under-appreciating the potential dangers and what the key government leaders on the virus are saying."  

The Raymond James analysts, citing interviews with sources including public health experts, said they believe the number of virus cases in China to be 400,000 or more, dramatically higher than the country's official count.

The global economic impact could be felt in a number of ways, including lower consumption due to illness and travel restrictions, and a labor shock if large numbers of people are unable to work, Oxford Economics noted. 

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