Here’s how much the coronavirus is costing the world (so far)

The coronavirus isn’t just costing lives: it’s also costing livelihoods. As the death toll rises around the world and the disease spreads, it could cost the global economy millions in lost income, stock-market drops, tourism dollars and more. It will also have some surprising repercussions in seemingly unrelated industries, including the major way it’s already affecting construction. Here’s what this virus is doing to us financially – and has the potential to do if the crisis worsens.

This will have a deep and profound effect on the global economy, says professor of economics, Dr Tenpao Lee. “With our global economy, and the fact that China makes up about 16 per cent of that, the economic ripple effects will be felt around the world,” Lee explains. “The global supply network has been broken, and a significant portion of the global economy is halting.” Lee believes that global recession – affecting developed and developing countries – is inevitable in the first two quarters of 2020.

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Global equity markets lost trillions in value during the week of February 24, says Andrew Schrage, CEO and co-founder of Money Crashers. “Much of that value will return as the initial panic subsides and central banks take emergency action to assuage investors’ fears, but that’s not much comfort for weak-kneed investors gaping at their shrunken superannuation funds,” he says.

The travel and logistics sectors have been the hardest hit, Schrage says. In particular, airlines and transportation companies have lost many billions in market value since the beginning of the year. “The shock is worse than anything that’s happened since 9/11,” Schrage says. “Depending on the extent and duration of the pandemic, the long-term impact could wind up being worse than 9/11.”

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Since many production factories are closed, the aggregate supply curve will shift to the left with higher prices and lower quantities, Lee says. “On aggregate demand, consumers staying home and spending less money to fuel the economy means it will also shift to the left with lower prices and diminished quantities of items sold, which also points to a possible recession,” he explains. “Put aggregate demand and aggregate supply together, and we are most certainly looking at a recession.”

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The Reserve Bank of Australia’s 25 basis point emergency cash rate cut has been passed on to customers and businesses in an attempt to make consumers and businesses feel more confident about the future. The cut brings interest rates down to an historic low of 0.5 per cent.

Many businesses large and small have to wait for net payment terms before getting paid, says Steven Lee, co-founder of invoice finance marketplace Crowdz. “With these types of global incidents, the delay in revenue further pushes out when a company gets paid,” he explains. “Due to the loss of revenue from companies, factory shutdowns or stocks taking a hit, and fear of global catastrophes like coronavirus have a huge impact on business cash flows.”

Currently, that mainly involves business trips, according to a recent series of surveys with Reservations.com. The survey found that 43 per cent of people would definitely cancel an international business trip; 63 per cent probably, very probably, or definitely would cancel a business trip; and 35 per cent of those in the 45- to 54-year-old age group would definitely cancel a trip, though this age group was the least likely to commit to cancelling. While 66 per cent of people responded that they wouldn’t cancel a holiday at this point, that may change in the coming weeks as more cases emerge around the globe.

Fears of the coronavirus have prompted many closures, including even the Louvre. The World Health Organization says that coronavirus isn’t a pandemic yet, but many people are still scared of crowded areas. As a result, major events – including the Six Nations Rugby Match, Facebook’s Global Marketing Summit, Japan’s Azalea Festival, global fashion weeks, the China Grand Prix, and the CERAWeek energy conference – have been cancelled or postponed. Plus, there are concerns that the 2020 Summer Olympic Games, which are set to be held in Tokyo in July, might be cancelled. That would be an enormous loss not just for the athletes but also for Japan’s economy, networks around the globe and related industries.

Excited about the next instalment of the Mission: Impossible franchise? Sorry, but you might have to wait a little longer to see it. Production in Italy has been halted, due to that country’s surging coronavirus cases, and that may affect its 2021 release date. While experts aren’t yet sure what kind of impact the coronavirus will have on the entertainment industry as a whole, according to Business insider, it’s not looking good. Aside from production delays, theatres in China are closed, and this will affect Hollywood greatly. China is a massive market for films – especially those that need to make back their $200 million production budgets. Mulan‘s live-action remake, for example, which is due in theatres around the world on March 27, may not make it to China, which was expected to be its largest market.

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Source: RD.com