Economic fall-out from Coronavirus may be huge
The economic damage that the Coronavirus epidemic could wreak globally, was confirmed when the United States raised its travel advisory for industrial giant South Korea.
Published: February 23, 2020, 8:54 am
The US State Department said on its website that the travel advisory has been raised from Level 1 to Level 2, which calls for exercising “increased caution” as opposed to “normal precautions”. Level 3 means “reconsider travel” while the highest Level 4 means “do not travel.”
The measure comes in the wake of South Korea reporting 433 confirmed cases of the COVID-19 virus, including two deaths. On Monday, the total infections spiked to 763 and seven deaths, with health authorities struggling to contain the virus in the southwestern city of Daegu where more than half of the total cases were reported.
“Many cases of COVID-19 have been associated with travel to or from mainland China or close contact with a travel-related case, but sustained community spread has been reported in South Korea,” the State Department said in a notice. “Sustained community spread means that people in South Korea have been infected with the virus, but how or where they became infected is not known, and the spread is ongoing.”
Its official name is Sars-Cov-2, the virus responsible for the cases of Covid19, or the disease with pandemic characteristics that has prompted the WHO, the World Health Organization, to declare the global health emergency. Older adults and those with chronic medical conditions, in particular, are considered to be at higher risk for severe disease.
China, the source of the outbreak, recently effected a statistical change in their accounting for new cases. But this was done in the middle of the influenza season in the Northern hemisphere, the WHO noted .
The Chinese government had added a new category of infections to the total number of COVID-19 cases instead of just two published categories, namely “suspected cases”, which were people who may have come in contact with the virus and showed flu symptoms, and “confirmed cases” of patients who fell ill and where the virus was found during tests.
The new category included people who showed signs of pneumonia even when tests do not detect the nCov19 virus in their bodies. The new count thus include people who simply have a common flu.
Those cases listed in the new category had a death rate that was much smaller than the original COVID-19 cases, suggesting that pneumonia is not a reliable indicator for a nCoV19 virus infection.
On February 20, Chinese authorities reversed their position and “clinically diagnosed” cases, people showing only signs of pneumonia, were no longer included in the published numbers. This led to a drastic fall in new cases reported.
UPDATE: China's National Health Commission reports 18 new cases of coronavirus and 1 new death outside Hubei province since yesterday https://t.co/eUoE2b20hL
— BNO Newsroom (@BNODesk) February 23, 2020
Despite the spike, the general trend of newly confirmed or suspected cases has been going down since February 5 as a result of China’s rigorous handling of the outbreak. The country has organised the largest containment via quarantine of human beings in world history.
Japan has been less rigorous however. On a quarantined cruise ship, the Diamond Princess in Yokohama with 3 700 passengers and crew members on board, there were originally only ten cases on board. Now 634 passengers have tested positive for the virus.
Dr. Kentaro Iwata, an experienced specialist for infectious diseases, visited the ship and reported that there were no significant isolation measures taken by authorities, with no safe areas. Infected and uninfected people mixed during meals. After the visit, the doctor decided to put himself under quarantine.
Japan will be holding the summer Olympics later this year and it may have wanted to avoid negative headlines. The government’s slow reaction could wreck their Olympic dreams however.
In Daegu, South Korea, people from a Christian sect infected each other during mass. Iran has a smaller cluster in Qom with 14 cases. It closed all schools and seminaries and suspended religious gatherings in the city. Other countries have reported small clusters of the outbreak too.
In the Ukraine rioters had to be brought under control when they protested against quarantining evacuees from China near their villages.
Hong Kong has warned that the “tsunami-like” event from the virus has been devastating businesses already struggling as a result of months of anti-government protests. As Bloomberg reported, unlike in the US and rival Singapore, businesses in Hong Kong do not have recourse to any corporate rescue procedure. The lack of a proper legal framework for bankruptcy protection means companies are forced into liquidation, according to Johnson Kong, the president of the Hong Kong Institute of Certified Public Accountants.
The economic fall-out of this epidemic due to the enormous quarantine in China will be substantial. It will be felt especially in highly developed industries, argued one investor, Dan McMurtrie.
Some large factories which depend on parts from China will soon have to shut down. Then their other suppliers will also have to cease production, and the loss of income will be felt throughout the local economies, he explained.
“The effects of the epidemic may well lead to an end of the globalisation of production processes. Companies will go back to buy locally to be as unaffected as possible from similar future incidents. This might well be the most positive long term outcome of this epidemic.”
He added: “The biggest factor that’s not understood is the non linearity of supply chains. A two week total shut down does not mean a two week delay in products to consumer. This is very different from the tariff impacts, where pricing was adjusted.
“Just In Time (JIT) production is a form of operational leverage. And like all forms of leverage, there is a non linear downside effect. People are not putting it together that this is a very big deal. It’s not a one month hit. It’s not a one quarter hit. It’s an annual hit right now.”
In Italy, as in South Korea, officials noted on Friday that clusters of people become infected, with 14 people diagnosed with the Coronavirus in Lombardy, while two other cases have been identified in Veneto.
“There have already been clusters in Europe – in Germany and France,” Health Minister Roberto Speranza said. “Italy is ready. We had already prepared a plan because it was evident that what happened could happen.
“Now it’s a question of applying the plan. “Clearly this plan features immediate decisions for the areas of the outbreak in order to limit it”. Giuseppe Ippolito, scientific director of Italy’s top infectious disease hospital, the Spallanzani in Rome, said “the cases reported in Lombardy are the first registered on Italian territory and take us into a new phase.
As of February 22, based on data published by the European Center for Disease Prevention and Control (ECDC) in the site dedicated to the new coronavirus outbreak, a total of 77 825 cases were confirmed in the Covid19 laboratory, of which 2 359 died. This means a lethality rate of 3,03 percent.
The lethality rate is a ratio between the number of dead and that of the infected, while the mortality rate is that between the number of dead and that of the entire population (healthy and otherwise).
Even if a 3 percent of lethality seems very high, it must however be considered that two other Coronavirus diseases that have assumed the characteristics of an epidemic in the past have had much higher rates: 9,5 percent for SARS and 34,5 percent for MERS.
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