E C O N O M I C S
22
Edited by
Cristina Lindblad● One forecast has the
new coronavirus wiping out
$1 trillion in world outputmultiday rout wiped out stock gains for the year,
while yields on 10-year government bonds touched
record lows. “The market is pricing in a significant
slowdown in GDP and a 10% impact on earnings,”
says Zhiwei Ren, portfolio manager at Penn Mutual
Asset Management.
For now, central bankers and governments con-
tinue to bet that the virus won’t damage the world
economy by much and that there will be a rapid
rebound once the illness is contained. But that con-
fidence is being tested. While the International
Monetary Fund reckons the virus will force it to
knock only 0.1 percentage point off its 3.3% global
growth forecast for 2020, IMF Chief Economist Gita
Gopinath said in a Feb. 24 Yahoo Finance interview
that a pandemic would conjure “really downside,
dire scenarios.”
Broadly speaking, the current outbreak comes
close to the technical criteria for a pandemic—a
situation where a new virus, against which
most people do not have immunity, mushrooms
across multiple continents. The World Health
Organization has already raised its highest level ofThe global economy had seemed to be improving
as the anxiety caused by the trade wars and Brexit
eased. Suddenly, however, the world is confronting
the specter of the first truly disruptive pandemic of
the era of globalization.
With the death toll in the coronavirus outbreak
approaching 2,800 and approximately 82,000 cases
officially recorded across 30 countries, some econ-
omists are war-gaming what an uncontrolled out-
break could mean for global growth.
Oxford Economics Ltd. figures an international
health crisis could erase more than $1 trillion from
the world’s gross domestic product. That would be
the price tag for a spike in workplace absenteeism,
lower productivity, sliding travel, disrupted supply
chains, and reduced trade and investment.
Investors are already nervous. In the U.S. aPenciling Out a Pan demic