The virus, which originated in Wuhan, China, has sickened more than 34,500 people and killed 638 already, according to the latest data. The outbreak has also led to the closure of factories and businesses across the People's Republic.
“Our best guess is that the economic disruption related to the coronavirus will cost the world economy over $280 billion in the first quarter of the year,” Simon MacAdam, global economist at London-based Capital Economics, wrote in a note to clients on Friday. “If we’re right, then this will mean that global GDP will not grow in quarter-to-quarter terms for the first time since 2009.”
The outbreak, which began in early December, quickly drew comparisons to the Severe Acute Respiratory Syndrome, or SARS, epidemic in 2003 that left 8,096 sick and killed 774, according to the World Health Organization.
The speed and voracity with which the so-called Wuhan coronavirus is spreading prompted New York-based economists at JPMorgan Chase to slash their first-quarter economic growth forecasts for China to 1 percent – more than five percentage points below their pre-outbreak estimate.
A more adverse scenario -- in which the contagion doesn’t peak until April and factories remain closed for at least a week beyond their current Feb. 10 reopening date, extending disruptions in production, transportation and shipping -- would cause the Chinese economy to contract by 3.9 percentage points, the bank projected.
The slowdown in China, the world’s second-largest economy, will serve as a headwind to U.S. growth, which was expected to see a boost from the partial trade agreement with Beijing signed last month.
As part of the phase one deal, China agreed to buy $200 billion of additional U.S. products over the next two years, but those purchases are likely to be delayed because of the outbreak.
“The export boom from that trade deal will take longer because of the Chinese virus,” Larry Kudlow, director of the National Economic Council, told FOX Business’ Maria Bartiromo. Any impact on the U.S. economy will be “minimal,” he said.
The Federal Reserve has also warned of "possible spillovers from the effects of the coronavirus," and JPMorgan economists cut their first-quarter U.S. growth estimate by 0.25 percentage point to 1 percent to account for weaker exports to the country.
Meanwhile, Hong Kong-based analysts at the Japanese investment bank Nomura are “concerned that markets thus far appear to be significantly underestimating the potential economic impact” of the outbreak.
U.S. equity markets stretched to record highs this week before sliding off those levels on Friday.
Stocks have remained strong even though S&P 500 companies received 4.3% of their revenue from China in 2018, according to S&P Global., and a number of U.S.-traded companies, including Nike and Canada Goose, have warned the outbreak is having a material impact on business.
Scores of others, like McDonald’s, Walt Disney and Starbucks, have temporarily shuttered all or some of their operations in the country. American, United and Delta airlines suspended all flights between the U.S. and China, and the State Department warned American citizens not to travel there.
While most of the illnesses and all but one of the deaths so far have occurred in China, and the preventive measures in the country are stringent, the Shanghai Composite has held its own. The gauge fell 7.7 percent Monday as traders returned to work following a two-week-long shutdown for the Lunar New Year. By the end of the week, those losses were more than halved.
The perseverance of global markets may be due to the belief that growth is expected to come roaring back in the second and third quarters.
The JPMorgan economists see China’s GDP growth “rebounding sharply to 9.3%" in the second quarter and expect a “modest additional boost to the third quarter.”