Why the “Coronavirus” (2019-nCoV) is going to significantly disrupt global growth

Posted by Steve Kawaja on 3 February 2020

So, I’m not an epidemiologist, infectious disease expert, or even a doctor. I’m a business person, nerd, and someone who loved the movie Contagion, so I decided to attempt to determine the global economic impact of the 2019-nCoV virus (colloquially the “Coronavirus”) on Super Bowl Sunday. Yes, seriously.

In short, I'm scared. I think the "Coronavirus" will have an economic impact measured in the hundreds of billions to trillions on the global economy.

What is 2019-nCoV, and how severe is it?

Similar to the movie Contagion, 2019-nCoV is a betacoronavirus, like MERS and SARs, all of which have their origins in bats. The original source of the virus was a live animal and seafood market in Wuhan, China. The virus transfers through close human contact (under 6 feet) and now is believed to come through fecal-oral transmission which can occur at squat latrines common in China. Symptoms include fever (in almost all reported studies), cough and shortness of breath and fatigue.

R naught is an epidemiological measure of how cases one case generates over the course of its infectious period. Depending on the year, the flu is around 1-2. The various official estimates of 2019-nCoV put R naught at roughly between 2 - 5. SARS was about 3.

As of this morning (02/02/2020), there were 14,380 confirmed cases in China, 2,110 with severe illness (14.7%), and 304 deaths (2.1%). SARS had 8,098 total cases in 2003. 2019-nCoV is much less severe than SARS, which had a death rate of 10%, but 2019 nCoV already has many more cases and a much higher exposed population.

So why am I concerned?

Seemingly healthy people can transmit the virus. Virus transmission occurs from asymptomatic people who don’t show symptoms for up to 10 or even 14 days. That means people who appear healthy have transmitted the virus. That’s scary because lot’s of people could have been exposed or have contracted it unknowingly.
Not only have lots of people have been exposed, we simply don’t know how many. Wuhan is the “Chicago” of China. The Mayor of Wuhan estimates over 5 million people were exposed before the quarantine, and I have read estimates that up to 500,000 people travel a day through Wuhan which has a population of over 11 million people. The virus spread largely unchecked due to Chinese politics from December 1, 2019 to December 31, 2019 when China informed the World Health Organization, meaning the 5 million exposure estimate could even be low. 137,594 individuals remain under monitoring in China as of this morning. Lead researcher and dean of HKU’s faculty of medicine Gabriel Leung predicts that there will be 150,000 new infections a day in China by late April and early May. That’s right - 150,000 a day.
The virus has spread to 23 countries already, including 8 in the USA. It’s already global and already in the USA. Over 3 million Chinese nationals visit the USA annually, or over 8,000 a day on average. Anyone who came to the USA from China in December could have been a possible source of transmission. Assuming an average amount of visits, 240,000 Chinese people could have visited the US in December alone.
The dollars and scale of the impact are enormous. Pandemics have historically been really bad for the economy. Early economist estimates (usually wrong) already expect the impact to be 1.5% reduction in Chinese GDP. SARS had a $33 billion - $50 billion economic impact in 2003. Let’s take the lower end of the range to be conservative, which amounts to $46 bb in today’s dollars with a mere 8,098 cases (8 in the USA). Back of the envelope - over $5.6 mm impact per case in today’s dollars). These things are difficult to project for anyone, especially an amateur like me, but in short even small pandemics have had big impacts. So let's take a more informed voice like the World Bank which estimates the annual global cost of moderately severe to severe pandemics is roughly $570 billion, or 0.7% of global income.
The world economy still relies heavily on China. China is the world’s largest manufacturer and biggest importer of crude oil globally. The Chinese make over 150 million tourist trips and spend over $270 billion annually. China is the largest automobile, spirit and luxury goods market in the world, and the second largest economy overall. The U.S., Japan and India import more goods from China than anywhere else and the E.U. and Brazil sell more to China than to any other country.
The impact has already started. 60 million people are quarantined in China. President Trump initiated a travel ban starting tonight on all foreign nationals who have been to China in the past 14 days, which incidentally means exposed people have been exposed coming into the US. It does not restrict immediate family members of American citizens and permanent residents. American Airlines, Delta Airlines, and United Airlines said they would suspend air service between the United States and China for several months.

So that's why I am scared and that's why I think people are underestimating the impact of 2019-nCoV. My thoughts are with those already impacted, and my fears are for all of us. Let’s hope we rise to the challenge and don’t end up like the poor folks did in the movie Contagion.

Sources

https://www.cdc.gov/coronavirus/2019-nCoV/summary.html#anchor_1580079137454

https://www.cdc.gov/coronavirus/2019-ncov/about/transmission.html

http://www.hubei.gov.cn/zhuanti/2020/gzxxgzbd/fkkp/202002/t20200202_2017665.shtml

https://www.bloomberg.com/news/articles/2020-02-01/coronavirus-lurking-in-feces-may-reveal-hidden-risk-of-spread

https://www.contagionlive.com/news/clinical-characteristics-of-the-first-2019ncov-cases-in-wuhan-china,

https://www.cdc.gov/coronavirus/2019-ncov/about/symptoms.html

https://en.wikipedia.org/wiki/Basic_reproduction_number

https://www.nejm.org/doi/full/10.1056/NEJMoa2001316, https://www.eurosurveillance.org/content/10.2807/1560-7917.ES.2020.25.4.2000058

https://myemail.constantcontact.com/2019-nCoV-Updates---Feb-02.html?soid=1107826135286&aid=zdrtlodJ-0w

https://www.nejm.org/doi/full/10.1056/NEJMc2001468, https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200127-sitrep-7-2019--ncov.pdf

https://nypost.com/2020/01/27/five-million-residents-left-wuhan-before-coronavirus-lockdown-mayor-reports/