The impact will depend on the length of time taken to contain the virus
The impact will depend on the length of time taken to contain the virus

Coronavirus set to dampen China's economic growth: Fitch

ANI | Updated: Feb 07, 2020 11:19 IST

Hong Kong, Feb 7 (ANI): The ongoing coronavirus outbreak will dampen economic growth in China this year but the scale of the impact remains uncertain and will depend on the duration and intensity of the health crisis, Fitch Ratings has said.
If the government was to launch a large-scale stimulus to offset the effects of the epidemic, it can have an adverse effect on other policy goals such as reducing financial risk.
"However, we believe that the government is only likely to do so if the economic impact of the virus proves to be substantially larger than the SARS outbreak in 2003," said Fitch in a statement.
Huge uncertainties remain over the impact of the coronavirus on China's economy. "We believe it is still too early to make definitive adjustments to our GDP forecasts at this stage and instead have examined some illustrative scenarios."
The SARS outbreak provides a useful benchmark but there are significant differences between that epidemic and the latest one. Notably, the novel coronavirus (2019-nCoV) has spread faster than SARS, and official travel and workplace activity restrictions have been more aggressive.
These factors suggest that the impact of the current outbreak on economic activity on a daily basis may be more intense than SARS, but the impact on GDP will also depend on the length of time taken to contain the virus.
SARS influenced economic behaviour significantly between early March and late May 2003. The service sector was the hardest hit but industrial output growth also slowed.
Services account for a larger share of China's GDP today than they did in 2003 (54 per cent compared with 42 per cent). The much harsher official 'lock-down' restrictions in place will also imply that if the 2019-nCoV epidemic were to last three months, its economic impact will very likely be more severe than SARS.
The tough official restrictions on economic activity can, however, result in a more rapid containment than SARS.
"A shock to services and industrial output similar in scale to that from SARS will cut growth in 1Q20 to around 4 per cent year-on-year, according to our calculations, compared with a forecast of 5.9 per cent in our most recent update and 6 per cent in 4Q19," said Fitch.
"Even allowing for some pick-up in growth in late 2020, this could see annual growth in 2020 fall to around 5.5 per cent compared with our latest annual forecast of 5.9 per cent."