Coronavirus impact: Experts see weakest quarter for global growth since GFC

The main channel of economic disruption at this stage, according to UBS, is largely via reduced tourism flows (in/out of China), and reduced import demand from China.

With coronavirus getting a tighter grip on the China and impacting world trade, most analysts have started lowering global growth forecasts as measured by the gross domestic product (GDP) for the first quarter of calendar year 2020 (Q1-2020). Those at UBS, for instance, expect this would be the weakest quarter for global growth since the global financial crisis (GFC) and on par with the Asian crisis in the late 1990s.

Global GDP, according to Arend Kapteyn, global head of economic research at UBS, will take a serious knock and slip to 0.7 per cent in the January 2020 quarter (Q1-2020) from 3.2 per cent in the December 2019 quarter (Q4-2019). Though he expects growth to rebound in the April – June 2020 quarter, the impact could slow the overall 2020 GDP growth by 20 basis points (bps) to 2.9 per cent.

The main channel of economic disruption at this stage, according to UBS, is largely via reduced tourism flows (in/out of China), reduced import demand from China — particularly of consumption goods — and restrictions imposed by third countries to avoid the virus spreading.

“We expect import growth in China to fall from 3.2 per cent in Q4 to a negative 4 per cent in Q1. The rebound we hope for in Q2 largely reflects delayed consumption effects in China, while the improvement in Q3 reflects the lagged impact of stimulus coming on line, particularly in China,” the UBS report says.

With the number of suspected/confirmed cases rising at an alarming rate, close to 99 per cent of those are in China, reports suggest. The economic impact, experts say, will also be magnified this time around compared to the SARS outbreak as Asia's weight in the global economy has risen from 21 per cent in 2003 to 37 per cent now.

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