The deadly coronavirus has so far claimed 17 lives with 440 infected, and as the world gears up for the Lunar New Year and associated flurry of travel, concerns of a further spread have grown.
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On Wednesday, the USA announced its first case of the coronavirus after a number of Australians were also tested for the virus, which originated from central China.
The Lunar New Year will see people in China make around 3 billion trips over the coming 30 days, triggering Hong Kong’s main share index to tumble 2.8 per cent on Tuesday after Chinese authorities confirmed the virus could be spread through human to human contact.
Additionally, Shanghai’s benchmark index lost 1.7 per cent and in Australia, Sydney Airport saw its stocks fall for a third day on Wednesday by 1.2 per cent.
So, what can we expect?
The SARS outbreak in 2003 killed 774 people and is estimated to have cost the global economy between US$40 billion (AU$58 billion) and US$50 billion (AU$73 billion).
According to Citigroup analyst Baoying Zhai, there are signs the coronavirus outbreak will play out in a similar manner.
“On China airports and airlines, we think there could be a similar pattern to the SARS period, with some lagged decline of passenger traffic, especially given this is happening during the Spring Festival transit,” Baoying said.
“This event will cause some short-term disruptions on stocks under our coverage, but as soon as the epidemic is under control, we believe they will be back to normal.”
The 2003 outbreak saw Hong Kong-based Cathay Pacific Airways’ shares fall nearly 30 per cent between December 2002 and April 2003. However, those shares went on to nearly double in the following year.
AMP Capital chief economist Shane Oliver said that while it’s too early to be sure, market concern is likely to echo the 2003 SARS outbreak.
Concern will rise only to begin declining a month later as health measures to restrict its spread, Oliver predicted.
“[Concerns could trigger] reduced travel mainly in Asia. This in turn will potentially weigh on mainly Asian growth in the short term, ie in the current quarter, and the impact on tourism flows could act with the bushfires as another drag on Australian growth this quarter.”
This drag could trigger an interest rate cut in February.
SARS also triggered a fall into recession for Hong Kong’s economy - something Australian economist Peter Switzer noted.
“Uncertainty always hits markets,” he told Sky News on Wednesday.
“You can’t expect this to be exactly the same as SARS but the markets have no idea, so when the markets have no idea and uncertainty prevails, they sell off.”
UBS economists Ning Zhang and Tao Wang have also warned of a hit to China’s economic growth, noting the “tremendous challenge” of the Lunar New Year.
“Given the limited information, the mortality rate of Wuhan pneumonia seems notably lower than SARS,” the two said in a report.
“However, the ongoing travel peak season is a tremendous challenge, which could complicate the disease diffusion.”
Global pandemic risk
A 2017 paper published in the Bull World Health Organ found expected annual losses from a major global influenza pandemic triggering 720,000 deaths would cost US$500 billion (AU$731 billion), or around 0.6 per cent of global income.
And according to the World Health Organisation (WHO), the cost of a major outbreak will be significantly higher than the cost of prevention.
“A severe pandemic can result in millions of deaths globally, with widespread social and economic effects, including a loss of national economic productivity and severe economic burdens on affected citizens and communities,” the WHO said.
The World Economic Forum has also sounded the alarm on the dangers of a pandemic, warning that the planet is “badly under-prepared for even modest biological threats”.
“The frequency of disease outbreaks has been rising steadily. Between 1980 and 2013 there were 12,012 recorded outbreaks, comprising 44 million individual cases and affecting every country in the world,” the forum said in its Global Risks 2019 report.
Billionaire Microsoft co-founder Bill Gates has also admitted the global disease risk keeps him awake at night.
“People rightly worry about dangers like terrorism and climate change (and, more remotely, an asteroid hitting the Earth). But if anything is going to kill tens of millions of people in a short time, it will probably be a global epidemic,” he wrote in his personal blog in 2019.
“And the disease would most likely be a form of the flu, because the flu virus spreads easily through the air. Today a flu as contagious and lethal as the 1918 one would kill nearly 33 million people in just six months.”
Why is a global outbreak such a risk now?
There are five key factors, the World Economic Forum has said.
We’re travelling more and taking germs with us. To compound that, we’re living in higher-density cities meaning it’s easier for diseases to hop from person to person.
Additionally, deforestation has been linked to nearly a third of disease outbreaks like Ebola and Zika.
And as climate change sees the planet become hotter, the ideal conditions for disease-carrying bugs like mosquitos last for longer portions of the year, allowing those insects to travel further and impact more people.
Human conflict and natural disasters are also seeing greater displacement of people, and often to new locations with poor health support infrastructure and higher changes of contagion.
“Among refugees, measles, malaria, diarrheal diseases and acute respiratory infections together account for between 60 and 80 per cent of deaths for which a cause is reported,” the World Economic Forum has said.
And while there’s hope, defending the world against such risks is a huge task, World Economic Forum president Børge Brende said.
“Renewing and improving the architecture of our national and international political and economic systems is this generation’s defining task. It will be a monumental undertaking, but an indispensable one.”
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