MONTHLY BAROMETER – WELLNESS EDITION
The spread of the new coronavirus is accelerating. According to health experts, the reproduction number, estimated at between 2 and 3 (on average, every infected person infects from 2 to 3 new people), makes an immediate containment of the outbreak elusive. It is still impossible to tell whether the outbreak will cause lasting and critical damage to China and the global economy. The gravity of this economic impact depends on the outbreak’s (1) duration, (2) severity and (3) spread, all of which are currently unknowns.
The companies that are bound to suffer the most are those that thrive on concentrations of people (travel and tourism, retail) + global businesses most exposed to China.
In 2003, the SARS pandemic caused major harm to the global tourism industry, while inflicting limited pain on the global economy—only amounting to an estimated $40 billion loss and a hit of 0.1 percent of global GDP.
The economic impact of the coronavirus risks being greater because China has become so much “bigger”: Its share of global GDP has quadrupled from 4 percent in 2003 to 16 percent today, while China’s growth accounts for roughly 30 percent of total global economic growth.
It is first and foremost the travel and tourism industry that will take the greatest hit. China is now the largest tourism source market in the world, with an astounding 159 million outbound tourists spending $275 billion in 2019 (GlobalData figures). These will be gone for, at the very least, a few months.
The data on how the virus is fast hurting tourism just keeps rolling in, from the International Air Transport Association estimating it would cost the airlines industry $29.3 billion in lost revenues this year to France’s Finance Minister reporting the country has seen a 30–40 percent drop in tourists since the outbreak. The virus could result in a 28 percent drop in Chinese visits to the US in 2020 (Tourism Economics), which translates into a $5.8 billion loss in airfare and domestic spending. As a reminder, Chinese tourists who traveled to the US (The US’ biggest source market) last year stayed on average longer (18 days) and spent on average more ($7,000) per visit than most other nationalities.