coronavirus virus is a risk for the weakened global economy

This should be the high season for a 12-room hotel near the train station in Wuhan’s Chinese industrial center. The Lunar New Year usually generates about $3,000 per month for that hotel.

However, the place is empty. Wuhan, focus of the outbreak of a new virus, is isolated. “There is not a single client,” said the hotel owner who only identified himself with his last name, Cui. You still have to pay rent and services. Instead of counting his earnings, he calculates losing $ 1,500 per month.

The outbreak came at a bad time for Wuhan, China and the world economy.

China, the world’s second largest economy, was already slowing down even before the coronavirus emerged.

At the same time, the world economy copes with the economic downturn of India, the seventh economy in the world, whose growth forecast was reduced last week by the International Monetary Fund.

The outbreak of the coronavirus has been compared to that of the SARS, which paralyzed the economies of China and Hong Kong for weeks in 2003. However, what is happening in China currently has more repercussions worldwide than before. In 2003, China represented 4% of global production; It is now 16%, according to the World Bank.

“A slowdown in growth in China will have considerable side effects in Asia and the rest of the world, given the size of China’s economy and its participation as a key driver of global growth in recent years,” said Eswar Prasad, an economist at the University Cornell and former head of the IMF’s China division.

No one knows exactly how the outbreak will evolve or what its economic impact will be.

The authorities are still trying to understand the new virus. It is from the coronavirus family, which also causes the common cold, as well as more serious diseases such as SARS.

The SARS experience gives reason to be optimistic. That outbreak initially hit the Chinese economy and, in the second quarter of 2003, Chinese economic growth fell from 11.1% to 9.1%. However, when the crisis gave way, growth recovered and reached 10% annually in the second half of the year.

“As far as we know, it will probably be similar this time,” said Andy Rothman, investment strategist at Matthews Asia. “People should not panic or think that growth will fall drastically” over a prolonged period.

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