With the coronavirus continuing to take its toll on China, a growing number of economists are starting to fret about the prospects for global growth with the world’s second largest economy shuttered.
As of Thursday, the outbreak has claimed more than 560 lives as confirmed cases have skyrocketed past 28,000, more than triple last week’s totals — including the whistleblower doctor who first flagged the growing contagion risk, who died from the virus Friday.
The outbreak has shut down manufacturing and retail in major hubs in China, and upended travel, leisure and retail industries.
The longer the world’s second largest economy remains effectively shut off from the rest of the world, the greater the toll on the global economy, even as the lion’s share of the cases remain behind China’s now-restricted borders.
“For the Federal Reserve, it’s going to impact their view on global growth because it’s going to be a substantial hit to China’s domestic demand,” Brett Ryan, Deutsche Bank senior U.S. economist, told Yahoo Finance this week.
“It’s at least two percentage points off of growth, it’ll probably be about 40 basis points off of growth for the U.S., and then add to that the Boeing impact in the first quarter which is another 30-40 basis points,” Ryan added.
“So for the next few months you’re going to be flying kind of blind if you’re the Federal Reserve,” he added.
Even as the number of confirmed cases dip modestly, World Health Organization officials warn that it does not indicate the virus has peaked.
China ‘pretty much shut down’
Global markets have fully recovered from knee-jerk selling last week and earlier this week, in which major benchmarks around the world tumbled sharply on fears of a global contagion. China’s decision on Thursday to cut its tariffs on U.S. goods in half helped grease the wheels of a broad rally on Wall Street.
However, businesses are still feeling the pinch, and many have shuttered operations in the crisis-battered Chinese economy. Nintendo was the latest to announce production delays that would largely affect distribution of its Switch console in Japan.
And some experts say that could eventually affect U.S. multinational corporations, with markets appearing slow to price in the impact.
“I think you’re going to get a lot more negative news flow when these (companies) reopen, and unfortunately I think you will see more factories and more companies close operations,” said Brad Gastwirth, Wedbush’s chief technology strategist.
With China all but completely out of commission, “If you have exposure from China and you’re relying on revenue coming form that space…you’re going to get hurt, especially if this lasts a couple of months,” said Eddie Ghabour, KeyAdvisors Group co-founder.
“I do think it will be short term,” he said, even as the immediate impact is likely to hit hard. “I mean China is pretty much shut down right now,” Ghabour added.
On Thursday, Dunkin’ Brands (DNKN) said it had temporarily shut roughly half of its Dunkin’ and Baskin-Robbins shops in China, Bloomberg reported, as the still deadly virus continues to claim lives.
Major brands like Yum! (YUM), Starbucks (SBUX) and Apple (AAPL) have also shuttered stores, and Macau’s casinos have shut down for at least two weeks.
The impact around the world
How the coronavirus stacks up against other deadly viral diseases.
Cruise lines, among the most hardest hit industries since the viral outbreak, continue to screen for cases. Japan announced 20 confirmed cases from a ship with 3,700 passengers on board. Meanwhile a new Carnival cruise ship is reportedly being turned away by Japan over fears of new infections.
WHO officials have also begun sending testing kits and protective gear to the more than 24 impacted countries and territories, and is convening an innovation and research forum next week. The intent is to prioritize where research funding should go for treatment and vaccine developments.
“We’re shadowboxing, we need to bring this virus out into the light so we can attack it properly,” said WHO director general Dr. Tedros Adhanom Ghebreyesus.
Biotech firms, including Johnson & Johnson (JNJ) and Gilead (GILD), are racing to try and find a vaccine for the disease. However, experts believe it will take a considerable amount of time for a vaccine to surface.
“We still have to be a little skeptical that a vaccine will be deployed in time for this epidemic,” Toronto-based infectious disease specialist Isaac Bogoch told Yahoo Finance this week.
He cautioned there is still a lot that isn’t known, but some developments have been relatively encouraging. For now, the coronavirus’ fatality rate has been far lower than in other viruses of its kind — including the severe acute respiratory syndrome (SARS).
“There is an emerging narrative that this virus may not be as severe as it was once thought,” Bogoch said.
“It looks like the proportion of people that is going to have a severe infection is getting smaller and smaller as we learn more about this disease,” he added.
“If we see more and more cases exported from China to the rest of the world…that’s a bit concerning,” Bogoch said, and could point to greater global spread beyond the regional countries near China.
Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem
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