An international outbreak of respiratory illness sparked by a novel coronavirus has spread from its origins in central China to at least 11 countries, with more than 1,200 confirmed cases — including a presumed case in Canada — and over 40 deaths.
Like previous outbreaks, including the SARS virus 17 years ago, the flu-like disease poses a risk to economies around the world as fear and confusion lead to abrupt changes in behaviour, decreased economic activity and a ripple effect across sectors that threatens everything from productivity to consumer prices.
The Severe Acute Respiratory Syndrome pandemic of 2003 cost the Chinese economy up to US$20 billion, according to the Asian Development Bank, as travel warnings and transit shutdowns discouraged consumption, foreign tourists stayed away and local residents stopped going out.
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“The travel and tourism sectors were most obviously hit, although that ripples through the entire economy,” said Richard Smith, a professor of health economics at the University of Exeter Medical School.
“But many effects are short-lived during an outbreak as once the panic is over people go back to business as usual.”
Chinese authorities clamped down on mass transit during the SARS outbreak, hampering commutes, shopping runs and social outings. The national securities regulatory commission closed stock and futures markets in Shanghai and Shenzhen for two weeks to prevent viral transmission. And Beijing ordered movie theatres, internet cafes and other venues to shut down temporarily while hotels, conference centres, restaurants and galleries saw visitors almost disappear completely.
China’s response to the current crisis appears to be swifter, and the disease less virulent, but the country now boasts a far more extensive high-speed rail network than it did in 2003, and its economy is six times larger, upping the risk of transmission and the repercussions of an epidemic.
“China is the engine of the global economy, churning out goods,” said German health economist Fred Roeder.
Its critical role in international shipping may be thrown into disarray as authorities begin to hold back some ships from entering the port at Wuhan, a key hub on the Yangtze River.
“If they cannot leave it creates huge delays in the supply chain and value chain of businesses all across the world,” Roeder said. “It could actually hit the latest generation of smartphone if ports are shutting down.”
Manufacturing could also feel the crunch as supply chains stall, he said.
Roeder has felt firsthand the disruptive power of a pandemic. In the summer of 2003 the teenage Berliner was eagerly gearing up for a United Nations youth conference that would take him to Taipei, but the event was cancelled a few days beforehand due to SARS.
The epidemic also sparked layoffs and time away from work. At one point Singapore Airlines asked its 6,600 cabin crew to take unpaid leave. Children stayed home from school, prompting more parents to shirk their job duties and further reducing productivity, said AltaCorp Capital analyst Chris Murray.
“I was losing guys left, right and centre as people were quarantined,” recalled Murray, based in Toronto — the epicentre of the SARS pandemic outside of Asia. The disease infected 438 Canadians in total and caused 44 deaths in the Toronto area.
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The economic damage culminated with World Health Organization’s one-week travel advisory for the city in April 2003, costing the Canadian economy an estimated $5.25 billion that year.
The outbreak of H1N1, or swine flu, in 2009 also sparked work “dislocations,” Murray said. “It went from, `Maybe it’ll be okay,’ to sheer panic.”
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Freelancers and gig economy workers such as musicians or ride-hail drivers may feel the pinch more acutely, since they can’t rely on a steady wage when demand shrinks.
“It’s something that unfortunately has happened before in a similar way and it tends to affect areas like retail,” said Carolyn Wilkins, senior deputy governor of the Bank of Canada, said this week.
“People don’t go out, they don’t fly in planes, they don’t do as much tourism to the affected areas,” she said.
The fallout makes workers ranging from servers to wholesale bakers to non-unionized hotel staff more vulnerable. Meanwhile spending or investment plans by larger companies may have to be delayed, said Roeder.
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It is not clear how lethal the new coronavirus is or even whether it is as dangerous as the ordinary flu, which kills about 3,500 people every year in Canada alone.
“Still, we should be extremely worried about the economic effects of this,” Roeder said, calling on Chinese authorities to work transparently with Western governments and disease control experts to mitigate the crisis.
“At the end of the day, it hits the entire economy. No one benefits from this.”
© 2020 The Canadian Press
Surprise Growth Makes South Africa’s Economy Bigger Than Before Pandemic Struck
(Bloomberg) — South Africa’s economy is bigger than before the coronavirus pandemic struck, after growing faster-than-expected in the third quarter on increased farm output.
Gross domestic product expanded 1.6% in the three months through September, compared with a contraction of 0.7% in the previous quarter, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. The median of 12 economists’ estimates in a Bloomberg survey was for growth of 0.4%. The economy grew 4.1% from a year earlier.
Full-year growth may also surprise on the upside. The central bank forecasts an expansion of 1.8% and the National Treasury 1.9%. For the nine months through September, an early indicator of where full-year growth may land, GDP grew by 2.3% from last year.
The 2.3% expansion in the first three quarters is a “reasonable indicator” of the annual number, said Joe de Beer, deputy director-general of economic statistics at the agency. “I can’t see it differing by more than” half a percentage point “from just a mathematics point of view,” he said.
“After taking into account the firmer-than-expected third-quarter figure, we expect growth to average closer to 2.5% in 2022, before slowing to just above 1% next year,” said Sanisha Packirisamy, an economist at Momentum Investments.
At an annualized 4.6 trillion rand ($265 billion) in the third quarter, GDP is about 53 billion rand bigger than the fourth quarter of 2019, before the pandemic struck. A contraction in the prior three months had reversed gains made in the first quarter that made it bigger.
The quarterly expansion comes even after Africa’s most-industrialized economy experienced record power cuts because state electricity utility Eskom Holdings SOC Ltd. couldn’t keep pace with demand from its old and poorly maintained plants. Industries behind the better-than-expected growth were agriculture and transport, which grew 19.2% and 3.7% quarter-on-quarter respectively.
Strong exports of mineral, vegetable and paper products also contributed.
Still, South Africa’s economy remains stuck in its longest downward phase since World War II and hasn’t grown by more than 5% annually in 15 years. The government’s National Development Plan, a 2012 economic blueprint co-authored by President Cyril Ramaphosa, says that level of expansion is needed for sustainable job creation in a nation where almost a third of the workforce is unemployed.
Slow structural reforms, political uncertainty and high levels of crime continue to weigh on fixed-investment spending in South Africa, with private companies wary of committing large sums of money to domestic projects. Gross fixed capital formation climbed 0.3% from the previous quarter.
Household spending, which comprises about two-thirds of GDP, declined 0.3% in the third quarter. It’s likely to come under further strain from high inflation and interest rates that are at a level last seen more than five years ago.
Weak growth is forecast for the final quarter because of continued rolling blackouts and a strike over wages that took place at Transnet SOC Ltd., South Africa’s state-owned logistics company that operates most of the harbors in the nation, in October. The central bank forecasts expansion of 0.1% this quarter.
Lackluster economic growth and mounting price pressures pose a threat to social stability in one of the world’s most unequal societies and may stymie efforts to reduce fiscal deficits and debt.
–With assistance from Simbarashe Gumbo and Rene Vollgraaff.
(Updates with economist comment in paragraph five. An earlier version corrected household spending figure in paragraph 11)
World Economy Heads for One of Its Worst Years in Three Decades
(Bloomberg) — The world economy is facing one of its worst years in the three decades as the energy shocks unleashed by the war in Ukraine continue to reverberate, according to Bloomberg Economics.
In a new analysis, economist Scott Johnson forecasts growth of just 2.4% in 2023. That’s down from an estimated 3.2% this year and the lowest — excluding the crisis years of 2009 and 2020 — since 1993.
However, the headline figure is likely to mask diverging fortunes, with the euro area starting 2023 in recession and the US ending the year in one. By contrast, China is projected to expand more than 5%, boosted by a faster-than-expected end to its zero-tolerance Covid strategy and support for its crisis-hit property market.
Differences will also be on display when it comes to monetary policy after a year in which central banks “dashed toward restrictive territory in a pack,” Johnson wrote.
“In the US, with wage gains set to keep inflation above target, we think the Fed is headed toward a terminal rate of 5%, and will stay there till 1Q24. In the euro area, meanwhile, a more rapid decline in inflation will mean a lower terminal rate and the possibility of cuts at the end of 2023.”
In China, where authorities are torn between a desire to support the recovery and concern about the weakness of the currency, “limited” rate cuts are on the cards.
Read more: Global Growth Set to Slow From 3.2% in 2022 to 2.4% in 2023
Securing good jobs, clean air, and a strong economy – Prime Minister of Canada
Autoworkers have been a keystone of the Canadian economy for generations. By investing in the future of the auto industry, we are not only securing good middle-class jobs, we are fighting climate change, and building an economy that works for generations to come.
Since January alone, Canada has secured several historic manufacturing deals for electric vehicles (EVs), hybrids, and batteries – deals that will create and secure thousands of good, middle-class jobs and provide the world with clean vehicles. Today, we are seeing the results of one of those deals start to roll off the line.
The Prime Minister, Justin Trudeau, was joined today by Premier of Ontario, Doug Ford, to open Canada’s first full-scale EV manufacturing plant, General Motors of Canada Company’s (GM) CAMI assembly plant in Ingersoll, Ontario. Starting today and going forward, the plant will build fully electric delivery vans – the BrightDrop Zevo 600 – which will help cut pollution and keep our communities healthy for our children and grandchildren.
Thanks in part to a $259 million investment from the Government of Canada, GM’s CAMI assembly plant was able to retool its operations to build these electric vans. By 2025, the plant plans to manufacture 50,000 EVs per year. This investment has helped secure thousands of well-paying, high-quality jobs across GM facilities, and is helping advance the electrification of Canada’s automotive sector.
The Government of Canada will continue to work to attract investment from companies around the world as we build our EV supply chain – from mining critical minerals to manufacturing batteries, and vehicles. By taking action today, we are positioning Canada as a global leader in EVs, fighting climate change, securing good jobs, and building an economy that works for all Canadians – now and into the future.
“When we invested in GM’s project to build Canada’s first full-scale electric vehicle manufacturing plant in Ingersoll, we knew it would deliver results. Today, as the first BrightDrop van rolls off the line, that’s exactly what we’re seeing. This plant has secured good jobs for workers, it is positioning Canada as a leader on EVs, and will help cut pollution. Good jobs, clean air, and a strong economy – together, that’s the future we can build.”
“Today is proof that our historic investments in EV manufacturing are paying off. With the first BrightDrop vans coming off the assembly line, we’re seeing the skill of Canadian workers making a huge difference as the world moves to EVs. Our government, in partnership with GM, is cementing Canada’s leadership in the EV supply chain.”
“This milestone represents GM at our best – fast, flexible and first in the industry. The BrightDrop Zevo is a prime example of GM’s flexible Ultium EV architecture, which is allowing us to quickly launch a full range of electric vehicles for our customers. And, as of today, I am proud to call the CAMI EV Assembly team the first full-scale all-electric manufacturing team in Canada.”
“This is a very exciting moment – a revolution in the way we transport people and goods. Today marks a huge day for BrightDrop, as we expand our footprint and begin producing the Zevo electric vans at scale, and a huge milestone for Canada on the road to a brighter future. Opening the CAMI plant is a major step in providing EVs at scale and delivering real results to the world’s biggest brands, like DHL Express, who will be our first Canadian customer.”
- The Government of Canada’s $259 million investment supports GM’s more than $2 billion project to reignite production at its Oshawa assembly plant, after operations stopped in 2019, and transform its CAMI assembly plant in Ingersoll.
- The investment is being made through both the Strategic Innovation Fund and its Net Zero Accelerator Initiative.
- The Government of Ontario made a matching contribution of up to $259 million toward the project.
- Founded in 1918, General Motors of Canada Company (GM) is one of the largest automotive manufacturers worldwide. It is headquartered in Oshawa, Ontario, and is one of Canada’s largest automotive manufacturers.
- GM is planning to introduce 30 new electric vehicles by 2025, eliminate tailpipe emissions from new light-duty vehicles by 2035, and become carbon neutral in its global products and operations by 2040.
- The automotive sector contributes $16 billion to Canada’s gross domestic product and is one of the country’s largest export industries.
- The automotive sector supports the employment of nearly 500,000 Canadians.
- The 2030 Emissions Reductions Plan, released in March, puts Canada on track to achieving our goal of cutting emissions by 40 to 45 per cent below 2005 levels by 2030 while continuing to build a strong economy.
- To make zero-emission vehicles more affordable and accessible, the Government of Canada offers incentives of up to $5,000 off the purchase or lease of a light-duty zero-emission vehicle through the Incentives for Zero-Emission Vehicles (iZEV) Program. Since May 2019, close to 176,000 Canadians have taken advantage of this program.
- Since 2015, the Government of Canada has invested $400 million in building approximately 35,000 zero-emission vehicle charging stations across the country.
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