The novel coronavirus COVID-19 has infected more than 90,000 people and killed about 3,000 people worldwide. The virus has spread to at least 70 countries. China has locked down over a dozen cities to contain the outbreak. China is the epicenter of global manufacturing and is deeply integrated into global supply chain. So, the outbreak has affected not only Chinese economy but also dozens of other economies. Here we take a look at the top 10 economies worst affected by coronavirus.
Coronavirus a major threat to global economy
The Organisation for Economic Co-operation and Development (OECD) has reduced global economic growth forecast for 2020 from 2.9% to 2.4%. The think tank warned that if the virus continues to spread, the growth forecast could be further reduced to 1.5%.
Factories in China and many other countries have suspended operations. Many banks and technology companies have asked their employees to stay at home to contain the virus. Hundreds of flights have been canceled as the outbreak has affected international business travel. According to the International Air Transportation Association (IATA), the global airline industry is estimated to lose $29 billion due to the virus.
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Corporate giants like Apple, Microsoft, United Airlines, and Mastercard have warned of a decline in profits and sales. People are choosing to stay at home. As a result, shops, restaurants, and other outlets have witnessed a steep fall in demand. Car sales in China fell as much as 92% in February. Worried individuals are avoiding activities that could expose them to the novel coronavirus.
The virus disrupts China’s manufacturing
Of course, the Chinese economy is the worst affected by coronavirus. According to the United Nations Conference on Trade and Development (UNCTAD), China’s Manufacturing Purchasing Manager’s Index (PMI) has fallen to 37.5. That’s the lowest PMI reading since 2004. A PMI below 50 indicates contraction. The decline has been a direct consequence of the coronavirus outbreak.
China is the global manufacturing hub. A manufacturing slowdown in the country “will have a ripple effect” on the global economic activities. According to a report from UNCTAD, the falling output in China has caused a $50 billion decline in worldwide exports in the month of February alone. The most affected sectors were machinery, precision instruments, automotive equipment, and communication equipment.
“The #coronavirus outbreak carries serious risks for the global economy,” UNCTAD head @UNCTADKituyi said.
— UNCTAD (@UNCTAD) March 4, 2020
Economists polled by Reuters expect China’s GDP growth to fall to 4.5% in the first quarter of 2020 from 6% in the precious quarter. Dozens of countries rely heavy on Chinese suppliers for components or raw materials. The virus could further disrupt the long-term supply chain. The long-term effects on global economy will depend on changes in the sources of supply and the containment of the virus. No one knows in which direction things will go.
Ten economies worst affected by coronavirus
In its latest report, the UNCTAD has published the list of economies worst affected by coronavirus. The report is based on the trade impact in the month of February 2020 due to the disruption in Chinese supply.
10- Switzerland, $1.08 billion
The trade impact for Switzerland was a little over $1 billion in February due to the coronavirus outbreak. Switzerland is not even among China’s top ten biggest trading partners. But China is a huge market for Swiss goods. The sectors most affected were chemicals, machinery, and precision instruments.
9- Mexico, $1.36 billion
Mexico suffered a trade impact of $1.36 billion last month due to the disruption in Chinese supply. It’s among economies worst affected by coronavirus. Mexico imports more than $44 billion worth of goods from China a year. The sectors that suffered the biggest blow were automotive equipment and electrical machinery.
8- United Kingdom, $1.91 billion
The UK is one of China’s largest trading partners. The disruptions in Chinese supply chain had a $1.91 billion trade impact on the country. The worst affected sectors were the automotive equipment, chemicals, and machinery.
7- Singapore, $2.16 billion
Last year, Singapore was one of the biggest winners from the US-China trade war. But the island nation took a trade impact of $2.16 billion in February as coronavirus disrupted the Chinese manufacturing and supply chain. Communication equipment and electric machinery were the most affected sectors, according to UNCTAD.
6- Vietnam, $2.3 billion
Vietnam is a rapidly growing electronic manufacturing hub. It is also one of China’s largest trading partners. So, the coronavirus-caused disruption in Chinese supply had a $2.3 billion trade impact on Vietnam. The sectors worst affected were communication equipment, leather products, and machinery.
5- Taiwan, $2.6 billion
Taiwan is a leading manufacturer of electronic products and office machines. China is Taiwan’s largest trading partner, accounting for nearly 30% of its exports. According to UNCTAD, the trade impact for Taiwan was $2.6 billion in February. As expected, the most affected sectors were communication equipment, office equipment, and electrical machinery.
4- South Korea, $3.8 billion
South Korea runs a huge trade surplus in China. In the last couple of weeks, South Korea itself is struggling to contain coronavirus. There have been at least 6,000 confirmed cases so far. The trade impact for South Korea was $3.8 billion due to the disruption in Chinese supply chain. The worst affected sectors were machinery, communication equipment, and automotive equipment.
3- Japan, $5.2 billion
Japan is one of the few countries that enjoy a huge trade surplus with China. Japanese companies have a strong presence in China. So, a disruption in the Chinese supply chain is bound to affect Japan. According to UNCTAD, the trade impact for Japan was a staggering $5.2 billion. The most affected sectors were machinery, automotive equipment, and communication equipment.
2- United States, $5.8 billion
The United States is among economies worst affected by coronavirus as the manufacturing slowdown in China disrupts global trade. The estimated trade impact for the US was $5.8 billion. The sectors most affected were precision instruments, machinery, chemicals, and automotive equipment.
As coronavirus continues to spread in the US, the Federal Reserve has slashed interest rates by 50 basis points to boost the economy. According to Goldman Sachs, the outbreak could reduce the US GDP growth by as much as one percentage point in 2020.
1- European Union, $15.6 billion
The European Union is the economy worst affected by coronavirus in China. The most affected sectors are machinery, automotive equipment, chemicals, and precision instruments. The epidemic is evolving rapidly. If not contained, coronavirus could have a much bigger economic impact worldwide, especially considering the importance of China in the global value chain.