Contagious Disease Current Events Economics - General

Projecting the economic impact of covid-19

The Economist has an interesting series of article (here and here) on covid-19, the new WHO name of the corona virus. One key issue is how strict containment efforts should be. These decisions are being made not just based on the potential to impact the health of a country’s population but also economic and political factors as well.

All countries must balance their fear of the human and economic costs of the virus against the damage caused by measures to contain it. For less well-off countries, the trade-off is especially painful. Tourism generates more than a tenth of Thailand’s GDP. In 2018 about a quarter of the 38m holidaymakers who visited the country were Chinese. In desperation, Thailand has neither restricted Chinese tourists from entering the country nor stopped giving them free visas on arrival.

Western firms with exposure to China may be facing a rocky road in the coming months. The Economist lists out three key reasons.

First, big multi-nationls have left themselves dangerously exposed to supply chain risks owing to strategies designed to bring down their costs [e.g., “just in time” supply chains]…The second vulnerability arises from the fact that giant firms are much more reliant on Chinese factories today than they were at the time of the SARS outbreak in 2003…[third,] the regions worst affected by covid-19 and the subsequent government lockdowns are particularly important to several global industries. The electronics industry is most at risk…the car industry has also been hit…[and] fears of the virus are now affecting the global oil price.

While the health impact of covid-19 is the most important dimension to consider, the economic implications should not be ignored.

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