More than 64,000 infected, GDP cuts, and SARS parallels: Here’s how bad the global economy could get as the coronavirus outbreak rages

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Coronavirus has infected 64,000 and killed 1,380 so far. And as the health crisis worsens, it’s become increasingly clear that the outbreak will have wide-reaching economic consequences.
China’s economy is forecast to grow by the smallest margin since the Great Recession — news that will hit its embattled and vulernable banking sector hard.
The fallout is also expected to bleed into the US economy: 88% of economists predict a 0.5% hit to quarterly growth.
Equity markets worldwide have whipsawed as investors react to new daily developments on the spread of the disease.
But historical data from Ebola and SARS show that stocks can recover quickly after a health crisis.
Visit Business Insider’s homepage for more stories.

Wuhan coronavirus, the flu-like disease named for the Chinese province where it was first reported, has killed 1,380 and infected more that 64,000. Though not as deadly as global epidemics like Ebola and SARS, coronavirus’ infection count is already bigger than both — combined.

Amid dire health concerns, there are also economic ones. The outbreak has already started a slowdown in China, the world’s second biggest economy. And since the nation if the focal point of many crucially important global supply chains, the strife has quickly spread to other regions, including the US.

The situation has all put industries, markets, and policymakers across the world on edge as they scramble to gauge how big of a slowdown the coronavirus could ultimately cause for the global economy

Detailed below is how bad experts think it could get for China and the US, specifically. Given their positions as the world’s dual economic superpowers, any negative developments for them could be downright catastrophic for the small economies that rely on them.

The worst-case scenario for China’s economy

Economists predict China’s economy will slow to to growth levels not seen since the 2008 financial crisis, a Reuters poll showed on Friday. The 40 economists surveyed said gross domestic product will fall to 4.5% in the first quarter, while full-year 2020 growth could be 5.5%, down from 6.1% last year.

Further, a recent report from Bloomberg found that analysts now see China GDP going as low as 3.8%. That would be an especially problematic growth rate, as it sits below 4.15% — a threshold that, when breached, would send the so-called bad loan ratio at China’s biggest banks up five-fold, Bloomberg finds.

For context, in 2019 the sector saw record loan defaults and the first bank seizure in twenty years in 2019 — and that was when the economy was expanding at a much more robust 6%.

Some economist predictions are even more of the doomsday variety: Evercore ISI said last week it expects 0% growth this quarter. While it’s unclear how much that figure would recover by year-end, that non-existent growth would factor into any worst-case scenario for an economy as instrumental as China’s.

The worst-case scenario for the US economy

It’s clear at this point that the coronavirus fallout will not just be contained to China, and Federal Reserve Chair …read more

Source:: Business Insider – Science

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