Impact of novel coronavirus to be larger but shorter-lived than Sars: StanChart economists

DUE to the fast-spreading novel coronavirus, economists at Standard Chartered Bank expect the global economy to undergo a deeper, but shorter-lived downturn in the early months of 2020 relative to 2003's Sars epidemic.

Standard Chartered's chief global economist David Mann and Asia economist Jonathan Koh said it is likely to be the case given the severity of the measures imposed by the authorities aimed at containing the virus.

The economists noted: "Both the Chinese and global authorities have taken resolute measures to contain the virus, which may result in a greater economic impact near-term but also shorten the period of the virus' rapid spread, resulting in a shorter downturn. We expect a sharper but shorter growth downturn this time than post-Sars in 2003."

Due to the economic effects of the virus, Standard Chartered has downgraded its forecast for China's growth in 2020 from 6.1 per cent to 5.8 per cent.

Given China's larger role in the global economy - it contributed 23 per cent to global growth in 2003, but is forecast to form 38 per cent to global growth in 2020 - Standard Chartered has also trimmed its estimate for global gross domestic product (GDP) growth from 3.3 per cent to 3.2 per cent.

The lender will be reviewing its forecasts for other major economies on expected sentiment and supply-chain disruptions from virus containment measures.

Among emerging market economies in Asia, Taiwan, Singapore, Thailand and Hong Kong are most sensitive to China's growth and may experience the largest knock-on effect from China's expected near-term downturn, Standard Chartered said.

Standard Chartered is of the view that tailwinds from dovish central bank policies, the interim US-China trade deal as well as this week's Chinese stimulus efforts should see global growth return to its pre-coronavirus rate by the second half of 2020.

The novel coronavirus outbreak, which is said to have originated in the Chinese city of Wuhan in December 2019, has claimed over 550 lives. Total infection figures are north of 28,000 - more than three times that of Sars. There are currently 28 cases of the virus in Singapore.

While the death toll and total infection figures are rising quicker than during the Sars outbreak, the mortality rate for now (2 per cent) is considerably lower than for Sars (10 per cent).