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Coronavirus: The hit to the global economy will be worse than SARS – CNBC

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A woman with a facial mask passes the New York Stock Exchange (NYSE) on February 3, 2020 at Wall Street in New York City.

Johannes Eisele | AFP | Getty Images

The new coronavirus outbreak will be worse for the global economy than the 2003 SARS epidemic was, data analysis firm IHS Markit predicts.

While both outbreaks originated in China, nearly two decades separate the SARS outbreak from the new coronavirus outbreak. In that time, China has grown from the world’s sixth-largest economy to the second biggest today behind the U.S. The country has been a main growth driver worldwide, with the International Monetary Fund estimating that China alone accounted for 39% of global economic expansion in 2019.

“Coronavirus will have a larger negative effect on the global economy than the SARS outbreak in 2003,” IHS Markit wrote, adding that China accounted for 4.2% of the global economy in 2003. The report says China now commands 16.3% of the world’s GDP. “Therefore, any slowdown in the Chinese economy sends not ripples but waves across the globe.”

SARS, which stands for severe acute respiratory syndrome, first emerged in China’s Guangdong province before spreading to other countries. The virus infected about 8,000 people, claimed almost 800 lives worldwide and shaved 0.5% to 1% off China’s growth in 2003, according to various estimates.

Though estimates vary, economists say that the SARS outbreak in China cost the global economy about $40 billion.

Most of the economic cost of the outbreak, though, “is not related to the virus,” said CEO of the World Travel and Tourism Council Gloria Guevara, who was the tourism minister for Mexico during the H1N1 outbreak. “It’s related to the panic.”

The long-term economic impact of the new coronavirus outbreak will be determined largely by China’s containment measures, IHS Markit’s report says. The Chinese government has quarantined Wuhan, the epicenter of the outbreak, and, by IHS Markit’s count, 11 provinces have extended the Chinese New Year holiday to keep workers at home and prevent the spread of the virus.

“If the current and unprecedented confinement measures in China stay in place until the end of February, and are lifted progressively beginning in March, the resulting economic impact will be concentrated in the first half of 2020,” the report says, “with a reduction of global real GDP of 0.8% in Q1 and 0.5% in Q2.”

If China ends those restrictions on Feb. 10, as is currently scheduled, the impact on the global economy will be much more limited, the report says. Most factories in China would be closed around this time for observance of the Chinese New Year, which is factored into expectations. However, the report says the outbreak threatens to severely hamper several industries, especially automotive manufacturing.

“The 11 Chinese provinces which have announced an extended holiday period are normally responsible for over two thirds of vehicle production in China,” the report says.

Employees with Ford Motor and Fiat Chrysler who are able to do so are working from home this week, while production at both automakers’ plants is scheduled to remain closed until at least next week, the companies confirmed to CNBC this week. Tesla has temporarily closed its stores in mainland China as of Sunday, Feb. 2, according to an online post from a company sales employee on that date.

General Motors, the largest U.S. automaker in China, last week told employees there that it will keep its Chinese factories shut down through Feb. 9

The uncertainty in China could also hamper global oil prices, the report says, adding that China accounted for half of the world’s oil demand growth in 2019. The Organization of Petroleum Exporting Countries and some allies have been holding talks this week to respond to the outbreak.

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Brazil economic activity much brisker than expected in June – Financial Post

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BRASILIA — Economic activity in Brazil rose more than expected in June, a central bank index showed on Monday, contributing to a second-quarter rally helped by a service sector rebound following the impact of the COVID-19 pandemic.

The IBC-Br economic activity index, a leading indicator of gross domestic product, rose a seasonally adjusted 0.69% in June from May, much higher than the 0.25% growth expected by economists, according to a Reuters poll.

In the second quarter, activity increased 0.57% over the previous quarter.

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The IBC-Br index was up 3.09% on a non-seasonally adjusted basis from June 2021, while in the 12 months through June it grew 2.18%, the central bank said.

Official GDP figures will be released by the statistics agency IBGE on Sept. 1.

Economy Minister Paulo Guedes recently estimated that the economy will grow above 2% this year, driven by the strength of the labor market and the normalization of economic activities that have suffered during the pandemic, with an emphasis on the services sector.

Meanwhile, private economists who started the year projecting a 0.3% rise in GDP in 2022 are now expecting 2% growth, according to a weekly central bank survey.

After the IBC-Br figures, Bank of America revised its GDP growth forecast to 2.5% from 1.5% previously, saying activity data was surprising on the upside as the service sector remained strong.

“Increase in social transfers and tax cuts should cushion the slowdown in the second half,” wrote David Beker, head of Brazil Economics at BofA.

For the second half, analysts had expected a slowdown amid aggressive monetary tightening led by the central bank to tame inflation, which has already pushed interest rates to 13.75% from a record low of 2% in March 2021. (Reporting by Marcela Ayres; Editing by Steven Grattan, Hugh Lawson and Rosalba O’Brien)

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Chinese Households’ Pivot to Thriftiness Is Bad News for World Economy – Bloomberg

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Chinese Households’ Pivot to Thriftiness Is Bad News for World Economy  Bloomberg



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Japan’s economy rebounds from COVID, growing 2.2 percent in Q2 – Al Jazeera English

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Growth driven by rise in private consumption following the lifting of pandemic curbs in March.

Japan’s economy grew an annualised 2.2 percent in the second quarter, as robust private consumption provided a boost to the country’s long-delayed recovery from the COVID-19 pandemic.

The relatively strong economic data released on Monday comes after gross domestic product (GDP) grew just 0.1 percent during the January-March period.

The growth was driven largely by a 1.1 percent rise in private consumption, which accounts for more than half of Japan’s GDP, as dining out, leisure and travel rebounded following the lifting of pandemic curbs in March.

The latest results mean Japan’s 542.12 trillion yen ($4.07 trillion) economy is now larger than it was before the pandemic hit.

The world’s third-largest economy, however, still faces an uncertain road to recovery amid slowing global growth and rising inflation, supply chain constraints, a weakening yen, and a resurgence in domestic COVID-19 infections, which have topped 200,000 daily cases in recent weeks.

In July, the International Monetary Fund cut Japan’s growth outlook for 2022 to 1.7 percent, down from 2.4 percent in April.

Japan’s economic recovery from the pandemic has lagged other countries due to weak consumption, which has been exacerbated by ongoing border controls and domestic pandemic restrictions that continued until March.

The weak recovery has turned the Bank of Japan into a global outlier, with it sticking to an ultra-loose monetary policy as other central banks raise rates to tame rising inflation.

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