The Impacts of Novel Coronavirus on Global Economy and Tourism

The emergence and spread of the Coronavirus since the end of 2019 is currently causing serious problems to the world, both global health and economy, tourism and other sectors. Of all the impacts, we have seen a significant impact on the world economy, especially China itself, which is the source of the virus. What is the impact of this virus? What measures have been taken by those affected countries?

According to the official announcement of World Health Organization (WHO), coronavirus is a “global health emergency”, one of the first fatalities of the new age in early 2020. The effects of the virus are spreading throughout the world, both in the global marketplace and in geopolitics. According to the China Daily, February 11, 2020, the death toll from the virus has risen to more than one thousand, more than 40,000 affected cases and in nearly 30 countries. WHO has named the coronavirus as COVID-19 and it has been announced globally.

The global economic impact may grow even more unpredictably, especially at a time when the Chinese economy is shrinking, as some US companies and other countries are shifting supply from China to elsewhere due to new taxes and trade tensions. The virus also acts as another disruptor for companies to diversify their supply chains faster. Following the first US-China trade agreement, the infection also undermined bilateral trade optimism, which has affected the market, changed the rate and increased the rate of global market decline. He will be in 2020. The World Bank will revise its global growth forecast that it would declines due to the outbreak of the virus and a new strain of COVID-19 and the global supply network. Many Chinese goods go out to the world through airplanes carrying passengers and goods and many airlines around the world have suspended flights to and from China, while some of China’s neighbors have closed their borders. The World Bank’s Economic Perspective predicts 2.5% growth this year, compared to 2.4% in 2019.

If the crisis lasts one or more months, then the Chinese economy may decline from 2% to 4% or less than this. The impact on the global economy was even more dramatic than during the 2003 pandemic, estimated to cause $ 40 billion in global economic losses, and an increase of 0.1% of global GDP. Meanwhile, the Chinese government has allocated more than $ 50 billion to revive the Chinese economy, but has not set any priorities.

New Covid-19 also seriously impact on world tourism, 10.4% of GDP and 10% of global unemployment. Thus, the situation would be contrary to the United Nations Tourism Organization (UNWTO) forecast, which forecasts since 2019 that global tourism will grow by 3-4% by 2020. China’s tourism market, which is particularly attractive to the world, for example, estimated that 163 million Chinese tourists in 2018, nearly one-third of the global travel package retail sales, were significantly reduced. Thailand has welcomed about 10 million Chinese tourists for two to three years consistently; Vietnam has received about 6 million Chinese tourists each year. Thus the presence of the Corona virus in the first quarter of 2020 has affected world tourism almost exclusively. For example, Thailand has cut its GDP forecast for 2020 and is poised to lose its expected revenue of USD 1.7 billion after strict travel measures has been taken for more three months.

Looking at the financial markets, we have seen far more crises. The stock market has dropped for the first time in Asia, but other markets in Europe and the US are doing well. In the meantime, the Hang Seng Index has lost about 6%, losses are less than 1%, and losses are seen on January 17, 2020, as the US Treasury drops below 1.6%. In addition, the US dollar and Japanese yen have strengthened while Chinese currencies and oil prices weakened.

If Compare to the SARS epidemic occurring at the end of February 2002, it is found that there were 8096 infections, 774 deaths and the disease had spread to 26 countries. The coronavirus first appeared in December 2019 and the death rate was much higher. SARS has dropped 9.4 million international tourists, about $ USD 30-50 billion, while China received only 38 million foreign tourists, as if Chinese tourists themselves went abroad 17 million people. Compared to 2019, China received 142 million international tourists and 134 million foreign tourists and 5.5 billion domestic tourists.

Some ASEAN countries and others around the world have suspended flights to Hubei, China. This has caused foreign and Chinese companies, both in China and abroad, to have difficulty in their production process. Estimates of China’s economic impact of disease accounted for about 1% of GDP in 2003, while the economic impact from the coronavirus accounted for 1.1% of the 5.8% forecast.

In particular, the impact on the Cambodian economy is that, since most of Cambodia’s investment and trade dependent on Chinese investment, the novel coronavirus outbreak has caused great concern for both local and foreign investors, especially Chinese investors. Overall, the number of tourists, investment in agriculture, industry, construction and real estate in Cambodia, Chinese is one of the first to be the backbone of Cambodia’s economy. Therefore, the novel coronavirus will put the Cambodian economy at greater risk for 2020. According to Ministry of Tourism statistics, there were 6.6 million tourists visiting Cambodia in 2019, of which 2.3 million were Chinese. This made Chinese tourists stood as the first rank, 35% of the total 110 foreign nationals. Therefore, the novel coronavirus will cause Cambodia tourism industry in difficulty, as most tourists cancel their trips to Cambodia.

Overall, the global economic impact caused by novel coronavirus which originated from China is more serious than other viruses such as avian influenza, SARS and Zika. Frankly, China is a great victim, and it has spread to the rest of the world. This reflects the interconnectedness of the global economy. It can be said that China’s economy is playing a large part in the global economy. We can also say that if China is in crisis, the world economy would be affected. If the virus continues to spread, the estimates of the global economic impact are also uncertain.

by Dr. Hong Vanak,
Department of International Economics,
International Relations Institute of Cambodia,
Royal Academy of Cambodia