Coronavirus outbreak: USD26bn weekly in trade spillovers | Article – HSBC VisionGo
how would the coronavirus outback impact the world economy?
Following the estimate of the economic impact on China, this week, we will look into the impact on the rest of the world: manufacturing and trade recessions are likely to continue, with a trade shock of USD26bn per week from the lockdowns in China (which should end on 9 February the earliest), and global growth barely staying afloat at +2% in Q1 2020.
- The coronavirus outbreak is likely to keep the manufacturing sector in recession in H1 2020. Electronics and computers are most at risk.
- Potential losses of exports of goods and services to China could amount to USD26bn per week as production and trade are paused. We have revised down our global trade growth forecast for 2020 by -0.5% to +1.3%. Hong Kong, the U.S., Japan, South Korea and Germany are most exposed. This weekly loss is equivalent to a raise in the world import tariff on goods by +1pp in 2020, that is to say more than the effect of the U.S.-China trade feud in 2019 (0.7%).
- The macroeconomic impact should remain contained (-0.3% on global GDP growth in Q1 2020 to +2%), if the business interruption in China doesn’t last for more than one month and business activity returns to normal after three months. While we think that the negative spillovers from the coronavirus epidemic will not last for more than three months, we doubt the global economy is strong enough to catch up entirely after the loss, given that the growth acceleration in H2 will be capped by U.S.-driven uncertainty.
Figure 5 – Pass-through effects of coronavirus outbreak in China
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