Coronavirus: Economic risks to the Asia-Pacific region

The outbreak of a SARS-like coronavirus (2019-nCoV) is developing into a major potential economic risk to the Asia-Pacific region now that there is medical evidence of human-to-human transmission. A total of 224 cases of pneumonia caused by the new coronavirus had been confirmed in China by Monday 20 January 2020, although the total number of coronavirus cases could be even higher. Fifteen medical staff in Chinese hospitals, who were treating patients with the Wuhan virus, have also contracted the virus.

With a number of coronovirus cases having already been detected outside of China, this outbreak is particularly concerning just as the Chinese New Year season gets underway, with millions of Chinese tourists travelling both within China and to many popular Asian tourist destinations, such as Thailand, Vietnam, Japan, Singapore and South Korea. Confirmed coronavirus cases have been identified in Thailand, Japan and South Korea already.

Now that the coronavirus has been found to be able to be transmitted from human to human, the economic consequences could be extremely concerning for the Asia-Pacific region. The 2003 SARS crisis created a severe negative impact on GDP growth for the Chinese economy and also hit the economies of a number of Southeast Asian nations, including Malaysia, Singapore and Vietnam. However, other economies are also vulnerable, with the SARS epidemic having also had a negative impact on the economies of Canada and Australia. Since the 2003 SARS crisis, China's international tourism has boomed, so the risks of a global SARS-like virus epidemic spreading globally have become even more severe.

Sectors of the economy that are particularly vulnerable to a SARS-like virus epidemic that can be spread by human-to-human transmission are retail stores, restaurants, conferences, sporting events, tourism and commercial aviation. A key concern is the potential risk for the Tokyo Summer Olympics in July-August 2020. Therefore, containing the current virus outbreak has become a key priority for Chinese and international health care authorities, with enhanced screening of travelers now being put into place in many major airports worldwide.

Posted 23 January 2020 by Rajiv Biswas, Executive Director and Asia-Pacific Chief Economist, S&P Global Market Intelligence