As health concerns about the impact of the novel coronavirus continue to grow, we thought we would take a look at estimating the costs of a global outbreak. While the size, scope and severity of the outbreak is still unknown, we can look to past events to get a sense of what the economic impact may be.
The Economic Ramifications Are Global
No one can accurately predict the financial impact of the coronavirus outbreak but we do know that it will be felt around the world. Obviously China will be hit hardest, followed by regional neighbours such as Thailand and Vietnam which rely heavily on Chinese investment and tourism. China is the world’s second largest economy and so far the outbreak has been recorded in at least 15 countries making this a global financial concern, as well as a health emergency.
Tourism Will Be Hit Fast & Hard
One of the first and most obvious industries to be affected by the coronavirus will be travel and tourism. China is the largest outbound tourism market. According to statistics from the State Administration of Foreign Exchange, Chinese nationals spent $127.5 billion on global travel in 2019, which represented an increase of 17 percent over the previous year. Some analysts and industry groups estimate that Chinese tourists actually generated over $250 billion dollars abroad in 2019. A large drop in this spend is inevitable and will be felt on six continents.
The Chinese Tourism Research Institute estimates that there were 180 million Chinese outbound trips in 2019. With tens of millions of Chinese currently under quarantine, this is expected to fall precipitously in 2020.
Thai government statistics show that in 2019 there were 10,944,721 travelers from China to the Kingdom, representing an increase of 4.35 percent over 2018. They spent approximately $17.6 billion dollars in the country. As the largest single group of travelers to Thailand, a large drop in Chinese travelers will impact the country heavily. Additionally it is expected that other European, North American and Asian travelers will be afraid to venture far from home this year further compounding the difficulties. You can see why Thai travel professionals are predicting a tough year ahead.
Meanwhile, the China Tourism Academy says the inbound tourism market to China surpassed $130 billion in revenue in 2019 making it the fourth largest travel destination in the world. The industry was expecting more growth in 2020 and planning for full hotel rooms and crowded airplanes, but this optimism is now gone as industry players expect tourism arrivals to China to drop significantly in 2020. This will not only impact the Chinese economy but also global airlines and hotels which have relied heavily on tourism in flows and out flows from China in recent years.
SARS May Be A Good Model To Predict The Actual Impact
The 2003 outbreak of SARS created a major global economic setback according to the World Health organization (WHO). The WHO says it resulted is a loss of $40 billion dollars globally which took out 0.1 percent of the world’s GDP. But the travel and tourism industry was the hardest hit. That year there was a 60 percent decline in hotel occupancy rates and up to a 70 percent decline in international travel to areas affected by SARS.