Friday 1st of March 2024

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Economic impact of coronavirus outbreak deepens

2020-02-24 7687

The rising cost of the coronavirus outbreak for business and the world economy is expected to become clearer this week as major firms issue trading updates and China reports the toll on its manufacturing sector.

The latest snapshot of industrial activity in the world’s second largest economy, due to be published on Monday, is expected to reveal a plunge in Chinese factory output in February as quarantine efforts to contain the disease disrupt supply chains – with damaging consequences for companies around the world.

China’s president Xi Jinping warned at the weekend that the coronavirus would have a “relatively big impact on the economy and society”. Adding that it would be short-term and controllable, Xi said the government would step up efforts to cushion the blow. The country has taken a number of measures in recent weeks to prop up its economy.

The head of the International Monetary Fund, Kristalina, said on Sunday that the global lender of last resort was ready to provide additional support, particularly to poorer countries by way of grants and debt relief.

Speaking at a G 20 meeting of finance leaders and central bank chiefs, she said the IMF assumed the impact would be relatively minor and shortlived, although she warned that the continued spread of the virus could have dire consequences.

She added: “Global cooperation is essential to the containment of the Covid-19 and its economic impact, particularly if the outbreak turns out to be more persistent and widespread.”

Efforts to prevent the spread of the disease were ramped up dramatically over the weekend by Italian authorities, raising the potential to harm eurozone growth at a time when the country’s economy is already in contraction.

More than  76,000 people in 27 countries have been infected by the new strain of coronavirus, known as Covid-19, that originated in the Chinese city of Wuhan at the turn of the year. More than 2,200 people have died.

International Airline Group, the owner of British Airways and Iberia, is scheduled to provide an update on its financial performance for 2019 on Friday that will be closely watched for updates about any potential future impact.

The International Air Transport Association (IATA), the trade body for the global airline industry, warned last week that falling passenger demand would cost the Airline Industry $ 29.3 billion in lost revenue this year  , with global air travel expected to fall for the first time in more than a decade.

Luxury goods group Hermes will also provide an update to investors on Wednesday. Analysts have warned that transport groups, hospitality chains, airlines, luxury goods makers and retailers will be among those hardest hit by the coronavirus as Chinese consumers stay away from the shops and travellers put off holiday plans.

There are also concerns for global supply chains as Chinese factories remain closed. Jaguar Land Rover warned last week , it would run out of car parts at its British factories by next week. The car manufacturer admitted it had been bringing in parts from China to the UK in suitcases.

Apple also sounded the alarm, warning of possible iPhone supply shortages because of the closure of its Chinese factories.