The Economics of World War Z

The Economics of World War Z

Issue 4

01.27.20 - The heavily reported on coronavirus outbreak in China has spooked the entire world, as we all conjure up images from some of our favorite apocalyptic Hollywood films. But as the world of memes and the internet has their fun with a serious situation, investors are on high alert for possible economic repercussions of the outbreak as financial markets respond.

The virus first appeared in Wuhan, a city located in eastern China. Since the outbreak was first reported, there have been hundreds of people reportedly infected, including three cases in the United States. As the death toll rises and the virus continues to spread rapidly, there is little doubt that it will pose some disruption to the world economy this quarter.

Economist and financial investors have good reason to be concerned about the outbreak as fears grow that a travel ban within the region could prove to be a major drawback to Chinese economic health – with some even predicting double digit percentage point hits on China’s GDP and possibly the global economy.

The rapid spread of the virus is coming at the most inopportune time for the world’s second largest economy, as the Chinese are still limping from the repercussions of the trade war with the United States. With the temporary closure of many consumer business’s in the region, consumer spending is set to take a step back at a very delicate time for China’s consumer health.

The outbreak of the virus could also potentially impact and harm other aspects of the global economy. Markets in the west continue to climb high following good economic data from Germany and the United States, but if China’s economy is hit hard, countries that rely on exports and globalized supply chains could feel some pain.