The virus, which has sickened 4,515 people in China and killed another 106, has led to the quarantine of almost 60 million people over the Lunar New Year, a period when roughly 520 million people were expected to travel by air and rail.
“Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, the economic impact now looks likely to be of at least a similar scale,” wrote Mark Williams, chief Asia economist at London-based Capital Economics.
Early data released by the Ministry of Transportation shows Chinese rail traffic fell 42 percent from the equivalent day last year while road traffic has fallen by 25 percent, according to Williams. He said that “equivalent declines” during the 2003 SARS outbreak were 57 percent and 45 percent, respectively.
The sharp reduction in holiday travel adds a severe headwind for an economy that grew at its slowest pace in 29 years in 2019 and was already expected to slow further.
Analysts at J.P. Morgan say the impact on full-year 2020 gross domestic product will “likely be limited,” pointing to the 2003 SARS outbreak. GDP growth slowed to 3.4 percent in the second quarter of 2003 after expanding at an average seasonally adjusted rate of 10.5 percent over the previous year. Growth snapped back with a vengeance in the third quarter, and averaged a seasonally adjusted annual rate of 13.5 percent quarter-over-quarter in the second half of the year.
The analysts expect “significant downside risk” in the tourism and transportation sectors over the next one to two quarters before being followed by a “notable rebound.” In 2003, retail sales fell by 2.6 percentage points, but the impact is likely to be smaller this time around because of online shopping.
But it’s not just the Chinese economy that is going to feel the impact from the coronavirus outbreak. All outbound travel by Chinese tour groups has been barred, cutting off the lifeblood of many of the region’s other economies, where Chinese residents account for about 50 percent of tourist arrivals. Additionally, Hong Kong has stopped issuing travel permits to Chinese citizens and Singapore, Malaysia and other countries have considered limiting arrivals.
“A 50% drop in Chinese tourist arrivals could knock up to 3%-points off the most vulnerable countries' GDP,” Gareth Leather, senior Asia economist, wrote in a note to clients, adding that tourism “accounts for more than 5% of GDP in Cambodia, Thailand, Hong Kong, Singapore and Malaysia.”
During the outbreak of SARS, an acronym for severe acute respiratory syndrome, domestic spending slumped across the Asia-Pacific region as consumers avoided shops and restaurants for fear they would become infected.