Unprofitable period: how much the world economy can lose due to coronavirus

In 2020, global economic growth may slow down from 2.6% to 1%. The value is expected to be the lowest since the 2008 financial crisis. This is stated in a study by the Institute of International Finance (IIF). The organization explains their assessment of the negative consequences of the coronavirus epidemic.

“The spectrum of possible consequences may turn out to be quite wide and will depend on the scale of the spread of the virus and how the epidemic will affect the economy, which is extremely difficult to assess at this stage,” the IIF experts say.

According to experts of the UN Conference on Trade and Development (UNCTAD), the world economy has already lost about $ 50 billion from coronavirus. According to economists, in many respects the observed situation is associated with a fall in Chinese production and exports.

Recall that at the end of December 2019, authorities in Chinese Wuhan reported an outbreak of a respiratory infection of unknown origin. According to local experts, the cause of the disease was a new type of coronavirus. To date, according to the State Committee for Health of China, the number of people infected in China has exceeded 80.4 thousand, more than 3 thousand of them have died.

As the infection worsened in China, production facilities began to close en masse. As a result, the Asian Republic faced a record decline in business activity. In February, the corresponding PMI in the service sector dropped to a minimum since 2005 and amounted to 26.5 points, while the industrial industry index fell to 40.3 points for the first time in 16 years. Such data are provided by the Caixin analytical agency.

Note that the PMI reflects the real state of a particular industry. A value above 50 points indicates a positive economic situation, below 50 points - about stagnation of the sector.

According to UNCTAD estimates, since the beginning of the year, the volume of production and export of China decreased by 2%. Against this background, China's trading partners began to record losses. For example, the United States lost $ 5.8 billion, Japan - $ 5.2 billion, and South Korea - $ 3.8 billion. However, the most serious blow fell on the EU countries - $ 15.6 billion.

“The pressure on the EU economy is associated with a rather high level of trade interaction with the PRC, especially in the supply of automotive components. No less important is the fact that Europe is now one of the largest viral distribution locations outside of China, therefore, the tourism, transport and trade activities of the region are experiencing a significant decline, ”Anton Pokatovich, BCS Prime analyst, explained in an interview with RT.

According to experts, in the coming months, the financial loss of the global economy from the coronavirus will continue to grow rapidly. According to the forecast of Oxford Economics, by the end of 2020, global GDP could be short of $ 1.1 trillion.

“Given the current trend in the spread of coronavirus outside mainland China, there is no need to talk about the completion of the acute stage of infection. The likelihood that in the near future the situation will continue to deteriorate remains quite high. Therefore, the loss figures presented by UNCTAD will continue to grow, ”explained Ivan Kapustyansky, Forex Optimum Lead Analyst, RT.

Cash vaccine

Against the background of negative forecasts, large financial institutions have already announced their intention to allocate funds to combat the effects of coronavirus. For example, the International Monetary Fund plans to send about $ 50 billion to countries in need, and the World Bank - $ 12 billion. Such data are presented on the official websites of organizations.

However, analysts do not expect a serious impact of cash injections on the global economy. So, if the virus continues to spread, financial support from the IMF and the World Bank can only have a short-term effect, says Anton Pokatovich.

“In fact, these resources of international financial institutions are just another cash injection into the economy. Whether such support measures will be able to stop the slowdown in global growth will depend only on the timing of the active spread of the disease and the scale of the pressure of infection on the economies of the largest countries, ”the expert emphasized.

According to UNCTAD experts, to a certain extent, the coronavirus epidemic has affected Russia as well. According to the organization, the country's financial losses amounted to about $ 149 million. At the same time, the spread of infection has a limited impact on the Russian economy. This was announced on March 4 by the Deputy Chairman of the Central Bank Ksenia Yudaev

“The direct impact on our economy is minimal. There is an indirect effect through a change in the situation in other countries, but on the whole, if we evaluate the situation with the economy with financial markets, today it is quite stable, but at the same time it requires constant monitoring and balanced decision-making, ”RIA Novosti quotes Yudaeva.