Covid-19 likely to cost global econ­omy $1 tril­lion this year

Few coun­tries will be able to weather the storm as a re­sult of fi­nan­cial woes

Pretoria News - - OPINION - TREVOR GOZHI

WHILE world lead­ers and sci­en­tists are grap­pling to come to terms with the con­tain­ing, quar­an­tin­ing and re­search on a pos­si­ble vac­cine and treat­ment of the Covid-19, ex­perts pre­dict the eco­nomic con­se­quences of the pan­demic could crip­ple the global econ­omy. The World Health Or­ga­ni­za­tion (WHO), has de­clared the out­break of the coron­avirus a global emer­gency and its spread­ing is ex­plo­sive.

As if the tragic hu­man con­se­quences of the coron­avirus were not enough, the eco­nomic un­cer­tainty it has sparked will likely cost the global econ­omy $1 tril­lion (R16.6 tril­lion) this year, the UN Trade and De­vel­op­ment Agency, Unc­tad, said re­cently.

“We en­vis­age a slow­down in the global econ­omy to un­der 2% for this year, and that will prob­a­bly cost in the or­der of $1 tril­lion, com­pared with what peo­ple were fore­cast­ing back in Septem­ber,” said Richard KozulWrigh­t, a di­rec­tor in the di­vi­sion on glob­al­i­sa­tion and de­vel­op­ment strate­gies at Unc­tad.

Launch­ing the Unc­tad re­port re­cently as global fi­nan­cial mar­kets con­tinue to tum­ble over con­cerns about sup­ply-chain in­ter­rup­tions from China, and oil price fluc­tu­a­tions among ma­jor pro­duc­ers, Kozul-Wright has warned that very few coun­tries could weather the storm as a re­sult of the fi­nan­cial woes.

The avi­a­tion in­dus­try is one of those to be hit hard. The ef­fects of the coron­avirus could wipe out up to $113 bil­lion in world­wide rev­enues this year, the In­ter­na­tional Air Travel Agency, (Iata) said re­cently, a new blow to the avi­a­tion in­dus­try.

Empty jumbo jets ar­riv­ing at de­serted air­ports. Masked pas­sen­gers dis­in­fect­ing their own seats. Stone­faced air­line ex­ec­u­tives hud­dling with US Pres­i­dent Don­ald Trump could be seen in the US.

With the coron­avirus out­break con­tin­u­ing to spread around the globe, the avi­a­tion in­dus­try is be­ing jolted. Air­line stocks dropped sharply re­cently as in­vestors around the globe reck­oned with the prospect of can­celled flights, lost sales and sub­stan­tial re­duc­tions in ser­vice – in­clud­ing United Air­lines, JetBlue and Lufthansa – an­nounced new route clos­ings.

An in­dus­try trade group said the coron­avirus could wipe out be­tween $63bn and $113bn in world­wide air­line rev­enues this year. The coron­avirus has al­ready sent stock mar­kets into con­vul­sions, rat­tled sup­ply chains and forced com­pa­nies to dust off emer­gency re­sponse plans.

Stocks in Europe re­cently plunged with the S&P 500 fall­ing more than 3%.

But the abrupt de­cline in global air travel sug­gested that the eco­nomic im­pacts of the out­break may be en­ter­ing a more dis­rup­tive phase.

David Clark, the gen­eral man­ager of Free­wheel, an ad­ver­tis­ing com­pany owned by Com­cast, flew to Kennedy In­ter­na­tional Air­port in New York re­cently after at­tend­ing a meet­ing in Can­cum, Mex­ico.

Clark, a reg­u­lar busi­ness trav­eller, said his flight was al­most empty and that both air­ports seemed quiet. He said he might not fly again for months. “It was a sur­real ex­pe­ri­ence,” Clark said, adding that he was left won­der­ing are the air­lines go­ing to be fine. It was al­most 20 years since the avi­a­tion in­dus­try faced such an ex­is­ten­tial threat.

After the ter­ror­ist at­tacks of Septem­ber 11, 2001, global air travel plum­meted, and it took years for air­lines to fully re­cover. To­day there are wor­ries that the coron­avirus could have a dis­as­trous im­pact.

“At the end of last week, we started see­ing very sharp de­clines,” Garry Kelly, chief ex­ec­u­tive of South­west Air­lines, said on CNBC. “It has a 9/11like feel.”

The avi­a­tion in­dus­try was al­ready grap­pling with the world­wide ground­ing of Boe­ing’s 737 Max which has been out of ser­vice for a year after two deadly crashes. Los­ing that one plane sapped some air­lines of ex­pected growth, forced them to can­cel thou­sands of flights and re­sulted in bil­lions of dol­lars in losses.

The more fun­da­men­tal is­sue posed by the coron­avirus – that large swaths of the trav­el­ling pub­lic may sim­ply stay off planes for the fore­see­able fu­ture – is a far greater threat.

Al­though still in its early stages, there are con­cerns that pro­longed dis­rup­tion could do last­ing eco­nomic dam­age. Com­mer­cial avi­a­tion, like the in­ter­net, is part of the con­nec­tive tis­sue of the global econ­omy.

“In lit­tle over two months, the in­dus­try’s prospects in much of the world have taken a dra­matic turn for the worse,” said Alexan­dre de Ju­niac, the head of the In­ter­na­tional Air Trans­port As­so­ci­a­tion, which forecast the po­ten­tial rev­enue drop of more than $100bn.

The rapid shift in for­tune is “al­most with­out prece­dent,” he said. On so­cial me­dia, trav­ellers shared images of planes de­void of pas­sen­gers. Oth­ers posted pho­tos of empty air­ports and tar­mac work­ers wear­ing full-body pro­tec­tive gear in ma­jor hubs like New Delhi, Zurich and Is­tan­bul.

South Africa has recorded 116 coron­avirus cases, prompt­ing fears that more could be wit­nessed in com­ing weeks and months.

On Sun­day, Pres­i­dent Cyril Ramaphosa con­vened an ur­gent Cabi­net meet­ing to dis­cuss a roadmap and ur­gent measures to ad­dress the ef­fects of the pan­demic.

Some of the measures in­clude schools closing yes­ter­day until the week after the Easter hol­i­day; a travel ban on na­tion­als from the EU, China, South Korea, US, Iran, UK, Italy and all visas granted to th­ese na­tion­als have been can­celled; 72 points of en­try into South Africa, 35 land bor­ders and two sea ports be­ing closed as from March 16; gath­er­ings of more than 100 peo­ple and vis­its to pris­ons can­celled for 30 days; and shop­ping malls in­ten­si­fy­ing hy­giene measures.

Many an­nual events on the gov­ern­ment’s cal­en­dar have been can­celled.

Gozhi is the man­ag­ing di­rec­tor of Spin Africa Me­dia and the pub­lisher of the Trans­port Tri­bune, Busi­ness Tri­bune, Women Achiev­ers and the Tri­bune Med­i­cal Jour­nal.

| Reuters

A MED­I­CAL mem­ber in pro­tec­tive cloth­ing takes sam­ples at a test­ing drive-in sta­tion for the health and hos­pi­tal pro­fes­sion­als where peo­ple can get tested for the novel coron­avirus dis­ease (Covid-19) di­rectly from their cars, in Espoo, Fin­land, yes­ter­day.

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