The spread of the (COVID-19) coronavirus has pushed the pause button on one in every of the worldwide largest financial powerhouses. When the world was first hit with SARS virtually 20 years in the past. It caused a financial blip largely for China and its neighboring nations. But at the time China’s gross domestic product was only 4 % of the global total and now stands at 16 % making China the second-largest economy behind the USA.
One main driver behind China’s economic rise was its huge community of factories, which churn out everything from t-shirts to mobile phones for consumers everywhere around the globe. Today China makes up 1/3 of global manufacturing and is the world’s largest exporter. A long-time of globalization has created supply chains so deeply interconnected that when there are issues in China’s economic system it is felt throughout the world.
In an effort to halt the spread of coronavirus Wuhan China the epicenter of the virus was sealed off, in China mandated factory shutdowns across most of its provinces. High-end motors had to suspend production in South Korea in early February, after not receiving parts it usually gets from China. Apple felt the crunch as effectively whereas the company designs and sells the iPhone it does not manufacture its parts.
It relies on a complex web of facilities throughout the globe to source its parts, with a heavy reliance on China due to the coronavirus impact. Apple has warned that sales are anticipated to fall short of targets and fewer iPhones will be available for sale in the market.
While these are some high-profile cases the hysteria around coronavirus has made traders nervous. The last week of February saw the US stock market suffer its worst week since the world financial crisis of 2008. The US and the Canadian central banks have slashed interest rates by half a percentage points. In response to mounting economic concerns and the Organisation for Economic Cooperation and Development said global growth could be cut in half to 1.5 % in 2020.
If the coronavirus continues to spread, but as of now the spread of the coronavirus is too unpredictable. Economist’s experts say for a recession to occur the coronavirus (COVID-19) would have to reach pandemic levels whether or not that occurs is still unknown. So how the coronavirus will truly impact the global economy will heavily depend not only on its severity or duration but also on whether consumers start to change their spending behaviors based on that fear.