Here at The Freedonia Group, we are actively considering the effect of COVID-19 on various industries and the economy at large, from its origins in Wuhan to its global spread.
In general, the qualitative effect is much easier to describe than the quantitative effect.
Tourism and travel-related industries will obviously be negatively affected by travel bans as well as by concerns about the potential to be caught in a quarantined zone. If the outbreak is significant in many countries, any business activity that involves people coming together in one place will be negatively affected. Closures and cancellations have included restaurants, schools, tourist destinations, concerts and sporting events, and business conferences. Such gatherings have already been restricted to varying degrees in places like China, Iran, Italy, Japan, South Korea, and Switzerland.
Industries with production facilities in quarantined areas or with employees unable to get to work because of quarantines in their residence areas (think Chinese workers home for the New Year holiday) will see production fall, at least temporarily. Other businesses outside of quarantine (or even in other countries) will also see production decline if the supply chain for critical components has been broken by production halts elsewhere.
Freedonia Group’s senior economist Thomas Bowne commented, “How large these effects will be worldwide depends on the progress of viral transmission, something no one knows with much certainty.” Today, the OECD* said it had already reduced its estimate for world GDP growth in 2020 from 3.0% to 2.4%. Its downside-risk scenario, which assumes epidemics breaking out in some other countries, could see world GDP growth drop to 1.5%.
*OECD (2020), OECD Economic Outlook, Interim Report March 2020, OECD Publishing, Paris, https://doi.org/10.1787/7969896b-en.
See all the latest entries from our analysts on our COVID-19 Economic Impact Tracker page here: https://www.freedoniagroup.com/Content/COVID-19-Economic-Impact-Tracker