Virus' impact on economy not yet clear, IMF says

The International Monetary Fund, or IMF, has said that it is difficult to quantify the impact of the new coronavirus outbreak on the Chinese economy at the moment, but it expects the effects could be temporary and be reversed once the virus retreats.

"The economic impact will depend very much on the behavior of the illness itself, the virus, how fast it spreads, who it affects and how quickly the contagion will run its course," Gerry Rice, the director of the IMF's Communications Department, said at a briefing on Thursday.

US President Donald Trump, in a speech at an auto parts manufacturer in Warren, Michigan, on Thursday said he believed the virus was "under control".

"We're working very closely with (China) and with a lot of other people and a lot of other countries," he said.

"We think we have it very well under control. We have very little problem in this country at this moment."

Rice noted that the direct economic impact of the virus would be mostly on demand, as people have stayed home in China. What is usually a busy retail and tourism season (Lunar New Year) has essentially come to a halt.

On the supply side, there have been production stoppages, transport delays and workers staying home.

Indirectly, the outbreak is having an impact on confidence and creating uncertainty. For example, Chinese financial markets remain closed for the Chinese New Year holiday, he said.

"Now all of that said, we would also expect that much of these effects could be temporary and be reversed once the virus retreats,"Rice said. "As roads and airports open up again, people go back to work, and firms make up for lost business."

If the virus retreats quickly, the impact likely will be small, similar to the 2003 SARS (severe acute respiratory syndrome) episode. Most experts agree that annual growth took a relatively small hit during the SARS outbreak because it was contained, according to Rice.

"If it's a small impact on China, the relative impact on the rest of the global economy would be smaller," he said.

But Rice noted that Asia would likely be most affected, as there will be a reduction in the number of Chinese traveling abroad along with a slowdown in imports and domestic economic activity.

"Again, there is a risk that these spillovers could be larger and reach further. We just don't know at this point," he said. "We at the IMF are monitoring this very closely."

'Too early to quantify'

At a teleconference organized by the council on Wednesday, Yanzhong Huang, senior fellow for Global Health of the Council on Foreign Relations, said: "It's still too early to quantify the potential impact".

Huang said that there is much "we still need to know－the case fatality rate, for example, of the virus".

Scott Kennedy, senior adviser and trustee chair in Chinese business and economics at the Center for Strategic and International Studies, said that much of the potential impact of the virus depends on whether it is contained or if it turns into a pandemic.

"But at a minimum, there will be a substantial hit to China's 2020 growth prospects," Kennedy said.

In Geneva on Thursday, the World Health Organization declared the outbreak a global emergency. But WHO chief Tedros Adhanom Ghebreyesus stressed that the UN agency disfavors or even opposes imposing travel or trade restrictions on China.

Tedros tweeted a day before that the Chinese are suffering the most from the virus outbreak. "Their lives and economy are bearing the brunt of the outbreak as they make sacrifices to contain it. China needs the world's solidarity and support."