Coronavirus: reasons to be cheerful

As Coronavirus sweeps across the continents, causing death and panic in unequal measure, I thought it might be useful to provide a bit of perspective by looking at the economic impact the virus is having – and what might be coming in the next few weeks.

In the immediate term, data from the US Centre for Disease Control covering the period of 1982-2018 shows the peak of the flu season is Feb, with a degree of peak flu activity trailing over into March with – in exceptional cases –  it lasting into May. Looking at this year’s data for the US, the peak would appear to have been be in mid-Feb, and the decline in reported cases is following the historical pattern. While the influenza hospitalisation rate in the US is greater this year than that seen last year, it well below the record level seen in 2017/18.

Looking to the longer term, it has been noted by Matt Ridley that it took years to sequence the genome of HIV, weeks to sequence the genome of SARS, and days for Covid-19. Such a sequencing is seen as being the first important stage in developing a vaccine.

The bottom line here is that, while there seems to be evidence that the Corona virus is rapidly spreading, there is also very likely to be a natural falling off in any flu pandemic as spring approaches. Rapid advances in immunology would suggest that a vaccine will be available before the next flu season is with us next autumn.

What is the likely economic impact in China?

Official economic data from China has been notoriously unreliable. The Chinese Government is still predicting a slowing down to 4% growth in 2020 (from an expected 5.8%), however economic forecasts from around the world frequently have great difficulty in anticipating volatility, even where such volatility has been a prominent feature in the recent past. The IMF’s most recent forecast (Oct ’19, so after the initial slowdown in freight rates) see a slowdown in imports, but otherwise exports, investment and overall GDP all remain on trend. China has not had a recession since before 1980, so any negative growth will come as an economic, political and cultural shock. Anecdotal evidence from business in China suggests that many factories remain shut and economic activity has been severely curtailed, so a sharp downturn has to be a realistic possibility.

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