Coronavirus Outbreak Poses Major Headwind for China

January 27, 2020

The recent coronavirus outbreak in China could not have come at a worse time for the nation’s economy. Already growing at the slowest rate in years, China’s economic growth has become increasingly reliant on consumer spending. Now, with travel locked down, movie premieres canceled and amusement parks closed, the nation faces significant a significant hurdle if it wants to meet its growth target.

The Wall Street Journal spoke to economists who anticipate that the outbreak could cost more than $5.77 billion, cutting a full percentage point off China’s GDP growth. Another economist predicts that if the situation is not stabilized by March, the country’s economic growth may fall below its 6 percent growth target.

China’s previous epidemic, the SARS outbreak of 2002 resulted in 800 deaths, cost the globe $40 billion and it took five months for Chinese stocks to recover. Today, consumer spending is a much larger portion of China’s economy, so even if the death toll of the coronavirus outbreak is not as high, its economic impact could be greater.

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