The virus outbreak in China is expected to intensify production disruptions and relocation away from China, and India could reap gains with the right set of policies, says Neha Anna Thomas.

 

The Coronavirus outbreak is expected to have immense global implications - GDP growth will take a hit, oil prices will drop due to weaker demand, global interest rate cuts will deepen, and so on. The economic research team at Frost & Sullivan has identified three 2020 scenarios tied to the virus outbreak: the gradual abatement scenario, the severe epidemic scenario, and the severe pandemic scenario. While the gradual abatement scenario initially carried a probability of 70 per cent, this figure now stands at 60 per cent with the spike of cases outside China in the past few days. From 2.9 per cent global GDP growth in 2019, growth is expected to slide to 1.7 per cent or less in 2020 should a severe pandemic scenario unfold.  

 

With China being much more deeply integrated with the world economy today through channels of trade, tourism, etc., compared to the 2003 SARS outbreak, the impact of the virus outbreak is expected to be much more pronounced. Economies across the globe face unique risks and implications based on ties with China and other factors. US businesses, for example, might not see timely Chinese purchases of goods and services as part of the Phase 1 US-China trade deal, while countries such as Japan and Sri Lanka face the prospect of a sharp drop in tourists.  

 

Some of the key implications of the virus outbreak in regards to India and the Middle East include: 

 

About the author: 

Neha Anna Thomas is the Senior Economist at Frost & Sullivan. For more information on this topic or to schedule an interview/interaction with our spokesperson, please email Priya George, Corporate Communications at priyag@frost.com.