In the wake of the outspread of Coronavirus, ecruit looks at how the disease is affecting commerce globally
It’s hard to read the news without being hit with headlines about Coronavirus. Coronavirus, or COVID-19, was first reported in Wuhan, China on the 31st December 2019 and has since become a world health crisis, spreading to 29 other countries and regions as of February 2020. COVID-19 is the latest strain of coronaviruses, a large family of viruses which can affect animals or humans. The media coverage of COVID-19 has understandably caused a great deal of anxiety, with surgical masks being the latest fashion amongst London commuters. With this latest disease outbreak, reminiscent of Bird Flu and SARS before it, ecruit wanted to take a look at just how much Coronavirus is affecting the Chinese economy, and its global ramifications on commerce.
A key factor of business success relies on risk management, and pandemics carry a huge amount of risk, often topping the national risk management frameworks in many countries. The coronavirus is no exception, and in fact could cause much more of a risk to business than some pandemics that have come before it. Due to international travel perpetuated by Chinese New Year, Coronavirus has spread to 29 countries. If we contrast this with the previous Ebola pandemic of 2013-16, COVID-19 actually presents a far larger threat to global economics. Where Ebola was a much more deadly disease, the disease was isolated to West Africa, and ultimately contained by a global effort to keep the disease from spreading. COVID-19’s spread affects much larger, interdependent economics, and this is only heightened by the current political climate when we are witnessing tensions building and trust eroding between countries.
Although we have made considerable progress since the Ebola epidemic, is a country ever fully prepared to handle a pandemic? The portrayal of COVID-19 in the media would assume not. As we all watch our governments try to deal with those affected, we unfortunately now also have to deal with constant media headlines along with social media. Incidences that may have previously been contained, are now perpetuated both over social media platforms and public media outlets to create a sense of mass hysteria. Stress, anxiety and a sense of a loss of control spreads over our countries as we now feel we have no choice but to accept the fate of Coronavirus, and the spread of panic becomes more deadly than that of the pandemic. Trust is broken as people start to believe that governments and healthcare bodies can’t help the spread, and this sense of distrust spreads to economic and business decisions.
The key place to start is by looking at China’s own economy. China is the worlds second largest economy, and leading trading nation, so any economic consequences from coronavirus threaten global growth. China’s economic growth has been predicted to slump to 4.5% in the first quarter of 2020, down from 6% in the previous quarter, the slowest pace since the financial crisis. This dip in the Chinese economy could clip global economic growth by 0.2%. If we put this into a conceivable number, the coronavirus could cost the global economy more than $1 trillion in lost output.
China is also one of the world’s largest manufacturers, factories had delayed opening after Lunar New Year, and further delays were caused due to factory workers staying home to contain the outbreak. Due to globalization, companies in 2020 are far different to those even some 20 years ago, wherein businesses have been encouraged to build supply chains that cut across national borders. The downside of this meaning that anything affecting Chinese production, has huge ramifications globally. Numerous Chinese factories have now shut down completely as the government attempts to put a halt to the spread of the virus, this creates a huge drop in production, seen in Apple’s decreased iPhone production and the shutdown of Tesla’s Shanghai factory.
With firms producing less, demand for inputs such as oil has slowed down. China is the world’s largest oil importer, so global oil demand has been hit hard by the spread of coronavirus. The first quarter of 2020 has shown the first drop in global oil demand in a decade.
Not only is production causing a huge impact on the Chinese economy, but with a population approaching 1.4 billion, China is also the largest market in the world. With the outbreak, stores are closed and job opportunities are reduced, causing a huge halt in Chinese consumption from local companies. Further to this, global companies hoping to sell products to Chinese consumers are now seeing huge drops in demand.
The affects of the Coronavirus on the global economy goes beyond the direct affects of trade relationships with China, the travel industry has been hugely hit by the outbreak. Closer to home, £100bn has been wiped off the value of Britain’s biggest travel companies in the last two days as fears increase over the pandemic as cases of COVID-19 were identified across Italy, Span, Austria and Croatia, all of which are key markets for airlines and holiday firms. Global airline revenues are expected to fall by $4-5 billion in the first quarter of 2020, as a result of flight cancellations.
According to the World Bank, a severe pandemic would resemble a global war in its sudden, profound and widespread impact. The virus itself, however, is not the key driving factor behind those losses, rather it’s the way that consumers, businesses and governments respond to the outbreak that matters most. People are more likely to stay home during an outbreak to avoid getting sick, meaning they avoid travelling, shopping and working. This then creates a fall in demand, and simultaneously decisions by companies and governments to close up shops and empty factories, creating a fall in supply.
So what should we take away from this? It’s not all doom and gloom, as Coronavirus has not been classed as a pandemic by the World Health Organisation, and confirmed cases in the UK are in very small numbers. Those affected have only been serious or fatal in cases of elderly or those with pre-existing respiratory issues or immune deficiencies, for the most part Coronavirus just means a very bad flu! Ecruit’s advice – lots of hand sanitizer.
As a recruitment advertising firm, we have already received emails from companies afraid to recruit in this period due to the uncertainty they feel about Coronavirus. What we want to know is if and Coronavirus has affected your business on a smaller scale? Comment and let us know.
- Nina Pezeshkian