Economic implications of the coronavirus – Rabobank

Analysts at Rabobank offered a brief overview of the potential economic impact of the coronavirus that has been plaguing China since late 2019.

Key Quotes:

“During the SARS outbreak China experienced a sharp dip in economic activity. Our calculations show that monthly growth dropped from roughly 10% (y-o-y) early 2003 to 6.6% at the peak of the SARS crisis. However, the economy rebounded quite quickly after the outbreak was contained, making up for previous losses. This underlines that the SARS epidemic did not have any negative impact on production capacity.”

“The question now is whether the current epidemic will result in (only) temporary limited economic effects. Based on the SARS experience and on the information we have right now, we think that a temporary impact of around 1-2% on GDP is a reasonable estimate. If this is largely offset by higher growth in the second half of 2020 the overall impact on annual GDP growth could still be relatively limited (to a few tenths of a percentage point).”

“What happens beyond the first quarter depends on the severity of the virus outbreak, the Chinese government’s ability to contain it, and government stimulus to make up for the economic damage.”