So far, estimates of the hit that Chinese economic growth will take range from 0.2 to 0.8 percent, depending on whether the outbreak slows as spring arrives and temperatures increase, much as happened with SARS. (Note: I’m not saying that this outcome is a given, though I sure hope so.)
The IMF predicts that COVID-19 could reduce China’s GDP by 0.4 percent to 5.6 percent this year, below the psychologically important 6 percent number. That would knock 0.1 percent off of the global economy. But that’s assuming the outbreak is contained quickly and that economic activity bounces back in the second quarter.
“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequence are more protracted,” IMF Managing Director Kristalina Georgieva told G20 finance ministers and central bank governors on February 22.
And what of the market impact? At first, the virus briefly knocked down share prices in recent weeks before US markets bounced back up again. Until this morning, that is: when news of the increasing spread outside of China dealt US shares a wallop.
Investors had hoped to see a quick “V-shaped” recovery but now are thinking it’s more likely we will see a “U-shaped” recovery -that is, one that scrapes along the bottom before turning quickly back up, like the SARS effect.
Odds are that markets will continue to bet on central bank support and that this correction, like all the recent ones, will turn out to be just a temporary blip in insanity. Bad news is good news for investors who believe that the Federal Reserve and other central banks will do anything to keep share prices from tanking.
But interest rates can only fall so far. And at some point, central bank asset buying will finally send share valuations so far out of touch with reality that all the money printing in the world will not save them.
Read more about it here.
An award-winning global thought leader with experience in strategy, immigration policy, finance, globalization, turnarounds, and crisis management, Michele Wucker draws on three decades in media and non-profit management and policy development. Her third book is THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore, which grew out of a presentation at the World Economic Forum annual meeting in Davos, Switzerland in which she coined the term “gray rhino” for highly probable, high impact crisis events. The book has received praise from business, policy, and thought leaders around the world and influenced policy debates at the highest levels. Michele founded Gray Rhino & Company in 2015 to help leaders and organizations to identify and strategize responses to gray rhino risks that are neglected despite -and all too often because of- their size.
Michele has been recognized as a Young Global Leader of the World Economic Forum and a Guggenheim Fellow, among other honors. Her previous leadership positions include Vice President for Studies at The Chicago Council on Global Affairs; President of the World Policy Institute, which she re-launched in 2007 in a dramatic turnaround; and Latin America Bureau Chief at International Financing Review. She also has taught master’s students at the School for International and Public Affairs at Columbia University, of which she is an alumna. An engaging keynote speaker, moderator, panelist, and facilitator, she has delivered presentations in 16 countries on five continents. She lives in Chicago.
Michele‘s speaking topics are:
- Gray Rhino-Proofing Your Future: A New Way To Think About Risk And Response
- Demographic Gray Rhinos: Robots Meet Aging And Migration
- Beyond Kicking The Can: How To Stop Muddling And Innovate