CORONAVIRUS INFECTS
Experts predict longer downturn
U.S. stocks plummeted Monday as fears of a long-term “coronavirus downturn” and global recession mounted, economists tell the Herald.
The highly contagious disease that started in China — and surged in other countries over the weekend — and resulting production issues prompted the Dow Jones Industrial Average to drop more than 1,000 points, marking its third worst drop in history.
The Dow lost 1,031 points, or 3.6%, dropping to 27,960 — wiping out its gains so far in 2020. It was the biggest drop in two years.
“The coronavirus downturn is coming,” Professor Nada Sanders of Northeastern University’s D’Amore-McKim School of Business told the Herald.
She noted the virus’ significant impact on the global supply chain.
“When facilities are being shut down and companies have a very lean supply chain, it becomes a disaster,” Sanders said.
Sanders said a global recession is possible. She noted that there’s no vaccine for the coronavirus, which has infected more than 79,000 people globally.
Gary Hufbauer of the Washington, D.C.-based Peterson Institute for International Economics agreed there is the danger of global recession if the virus continues to spread and a vaccine is not developed quickly.
“There would be all sorts of implications on society, with people avoiding contact with one another and governments stepping in to reduce that contact,” Hufbauer said. “That impacts trade and business all around the world.”
More than 77,000 people have been sickened by the coronavirus in China, where more than 2,500 people have died.
South Korea is now on its highest alert for infectious diseases after cases there spiked. Italy reported a sharp rise in cases and a dozen towns in the northern, more industrial part of the country are under quarantine.
There are also more cases of the virus being reported in the Middle East as it spreads to Iran, Iraq and Kuwait.
“Does this virus have pandemic potential? Absolutely, it has. Are we there yet? From our assessment, not yet,” World Health Organization director Tedros Adhanom Ghebreyesus said Monday. “The sudden increase in new cases is certainly very concerning.”
There have been 35 coronavirus cases reported in the U.S.
The viral outbreak threatens to crimp global economic growth and hurt profits and revenue for a wide range of businesses. Companies from technology giant Apple to athletic gear maker Nike have already warned about a hit to their bottom lines.
“There’s been a lot of uncertainty in the global markets for a while and coronavirus may be the final straw,” said UMass Amherst economics professor emeritus David Kotz. “This could push us into a global recession.”
But markets and economies remain relatively immune to global epidemics over time, past pandemics suggest.
Markets saw double-digit gains within six months of outbreaks of other infectious diseases including SARS, Zika, MERS and swine and avian flus, according to Dow Jones Market Data.