Economy In a world hanging from the coronavirus, the economy...

In a world hanging from the coronavirus, the economy falters

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People cross roads deserted by motorists on February 20, 2020 in Wuhan, the initial epicenter in China (AFP / STR)

The world stands still as the new coronavirus spreads. Planes are grounded, schools have closed in Japan, and rallies are banned in Switzerland. The global economy faces its worst risk of recession since the 2008 financial crisis.

“With the partial exception of black plague in 14th century Europe, each major pandemic has been followed by an economic recession,” observes Professor Robert Dingwall, researcher at the University of Nottingham Trent in England. “I don’t think there are any good reasons to think it would be different this time,” he said.

Long before the outbreak of the epidemic, the International Monetary Fund (IMF) had warned that the global recovery would be “slow”, “fragile”, likely to falter at the slightest risk.

Economists point out that the coronavirus could be too much “external shock”.

Especially since the list of radical measures to try to contain the new virus is growing day by day, the virus from mainland China spreading like wildfire on all continents.

As of January, production plants had been shut down and entire cities confined to China. Friday, the iconic Basel watch fair was adjourned and the Geneva motor show canceled. Saudi Arabia no longer welcomes pilgrims to Mecca.

Uncertainty also hangs over the holding of the Tokyo Olympic Games in July.

A total of 84,117 people have been infected with coronavirus worldwide. 2,870 died of it, according to an assessment established by AFP from official sources Friday at 17H00 GMT.

All eyes are now on the United States, hitherto almost untouched but where the American health authorities now expect contamination.

And the principle of hyper precaution could be fatal to the first world economy.


Traders in New York on February 28, 2020. Stock market panic has gripped the world due to the spread of the new coronavirus (AFP / Johannes EISELE)

Traders in New York on February 28, 2020. Stock market panic has gripped the world due to the spread of the new coronavirus (AFP / Johannes EISELE)

If there is contamination, “the reaction is likely to be extreme,” observes Gregory Daco, chief economist of Oxford Economics. “It would have a very negative impact. The economy would fall into recession immediately,” he said, especially since “the financial markets act as an agent that accelerates the feeling of panic.”

Beyond the cessation of production and telework employees, consumption, which accounts for 70% of activity in the United States, would suddenly stop.

The virus is not yet raging, but suspicion is on every street corner: in Washington, people are reluctant to shake hands during conferences, subway users are worried about their coughing neighbors. The Americans postpone their trips.

Donald Trump’s economic adviser Larry Kudlow urged calm on Friday and not to act hastily, saying the plunge of more than 10% on the New York Stock Exchange was “too far”.

“The (American) economy is solid,” he insisted, aware that if the world’s largest economy fell into recession, the rest of the world would be affected.

The IMF has already lowered its global growth forecast for 2020, taking into account the impact on China, the second largest economy in the world. It was before the contagion to the rest of the world.

– Fear –

Faced with “the obvious economic impact (…) we need clear, confident and unified professional and political leadership, which is always difficult to achieve in a country where the responsibility for public health is as decentralized as ‘in the United States,’ says Robert Dingwall.

It will also be difficult to manage the fear of the population in a political environment “as acrimonious”, notes the British researcher.

Barry Glassner, a retired American sociologist and author of a book called The Culture of Fear emphasizes that “nations and individuals need to take their precautions, including that of countering fear, which is spreading at least as fast as the virus itself. ”

“It is potentially more dangerous (because) people and governments often provide less rational responses when they are in the grip of fear,” he noted.


Elementary school children return home to Osaka, Japan on February 28, 2020. Authorities have closed some schools due to the spread of the new coronavirus (JIJI PRESS / STR)

Elementary school children return home to Osaka, Japan on February 28, 2020. Authorities have closed some schools due to the spread of the new coronavirus (JIJI PRESS / STR)

If the teachers are not sick, closing schools is also a questionable measure likely to lead to the opposite effect sought, observes Mr. Dingwall.

Many parents will be absent from their workplace where they are useful. As for older children left on their own, they simply risk going to public places where they will be more exposed to the epidemic.

“The potential threat at the moment is not that the United States is taking draconian measures, but that they are doing too little,” said Professor Rosemary Taylor of Tufts University. “In their attempt to minimize the threat of the coronavirus, they may not prepare and protect the population adequately,” said the epidemic expert.

Dt / VOG / dax

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