Coronavirus impacts global economy; growth forecast cut, cash flow hit, markets plunge

NEW DELHI: The global escalation of the coronavirus epidemic from China is severely impacting the world economy, hitting businesses, rattling investors and triggering a universal shortage of cash flow in several countries across the globe. Many leading world organisations have warned that the deadly coronavirus outbreak could cut global economic growth in half and plunge several countries into recession this year. 

Sounding the alarm as the disease spreads around the world, the Organisation for Economic Cooperation and Development has warned that the global GDP growth could plummet this year to as little as 1.5%, almost half the 2.9% rate it forecast before the outbreak took hold. The downturn could be the “gravest threat” to the global economy since the financial crisis more than a decade ago, it warned.

Meanwhile, the International Monetary Fund (IMF) has too warned that coronavirus will wipe out hopes for faster growth in 2020. The faster spread of the coronavirus will wipe out any hope of stronger growth in 2020, IMF Managing Director Kristalina Georgieva said on Wednesday, adding that a third of the Fund`s 189 member countries were now affected. Georgieva told a news conference after speaking to the IMF`s steering committee that the Fund now expects 2020 global growth will be below the 2.9% rate for 2019 and revised forecasts will be issued in coming weeks.

The changed view would represent more than a 0.4 percentage-point drop from the 3.3% 2020 growth rate that the IMF had forecast in January based on an easing of U.S.-China trade tensions. The IMF and World Bank President David Malpass underscored the importance of coordinated action to limit the economic and human impact of the virus. The IMF is making available $50 billion in emergency funding for members that includes very low-interest loans that could aid poorer countries in responding to the epidemic, she said.

Moody’s cuts 2020 growth projection for India

Amid growing concerns over the economic fallout of the novel coronavirus outbreak, Moody’s Investors Service has slashed its 2020 growth projection for India from 6.6% earlier to 5.4%. The agency expects a shallower recovery in Asia’s third-largest economy, considering that global growth will likely take a hit following the virus outbreak in China. On the other hand, the Reserve Bank of India (RBI) is considering using unconventional policy tools to spur lending amid fears that the coronavirus outbreak will derail any revival of economic growth. RBI is planning to infuse fresh cash liquidity into the system through a second round of long-term repo operations (LTRO), sources said.

Globally, central banks are taking steps to provide liquidity to stabilize financial markets, which have sunk as the coronavirus spread over more than 80 countries. The Federal Reserve slashed US interest rates by half a percentage point on Tuesday in an emergency move. Central banks in Australia and Malaysia also cut rates and, on Monday, the Bank of Japan took steps to provide liquidity to stabilize financial markets there. In India, market regulator SEBI is "internally assessing" the potential impact of the coronavirus epidemic on the capital markets, its Whole-Time Member SK Mohanty said on Wednesday.

Oil prices slump

Energy-rich Gulf states have scrapped or postponed dozens of events as part of measures to contain the new coronavirus, denting economies already hurt by slumping oil prices. From OPEC kingpin Saudi Arabia to the region's most diversified economy the United Arab Emirates, sports tournaments, economic conferences and major religious events have been sacrificed in attempts to curb the spread of the disease.

More than 150 coronavirus cases have been detected in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, mostly among people returning from pilgrimages to Iran. The Gulf region is already struggling to cope with decreasing oil revenues as the public health crisis paralyses economic giant China -- the world's biggest oil importer and buyer of Gulf oil. Now Riyadh has suspended the "umrah", the minor Islamic pilgrimage to Mecca that draws millions, while other Gulf nations have restricted entry to foreigners.

Citing "precautionary preventive measures" against the disease that has killed some 3,200 people globally, organisers of the inaugural Red Sea International Film Festival in Jeddah announced it had been postponed indefinitely. The bustling emirate of Dubai, known for hosting hundreds of conferences annually, has scrapped the Art Dubai exhibition, an international boat show and other events.

Saudi Arabia and other OPEC members were seeking to win support from Russia on Wednesday to join them in additional oil output cuts in a bid to prop up prices which have tumbled by a fifth this year because of the coronavirus outbreak. A panel of several representatives from OPEC states, Russia and other producers recommended on Tuesday cutting output by 600,000 to 1 million bpd only in the second quarter and said existing cuts of 2.1 million bpd by the group known as OPEC+ should be extended to the end of 2020.

Medical supplies, stocks hit

To restock pharmacies which are facing shortages of face masks along with hand sanitisers due to the coronavirus-triggered binge buying, industry insiders contended on the need to divert supplies along with imposing a total ban on exports of these items. Accordingly, pharmacies cite the phenomenon of binge fear buying has caused the shortage, as people rush to medical stores to get their hands on sanitisers, N95 or simple surgical face masks to protect themselves. The panic buying was triggered lately due to the rise in the number of coronavirus cases in India.

Not just face masks, even hand sanitisers are not available at many pharmacies across major cities like Delhi-NCR, claim industry observers. "We have received information about the shortage of hand sanitisers and face masks in Delhi-NCR region," All India Organisation of Chemists and Druggists` President Jagannath Shinde said.

"We have asked `Super Stockists` to re-route supplies from the less affected areas to metropolitan cities, so that these items are readily made available in these places. However, restoring availability might take some time."

Auto sector

Hubei province with its capital city of Wuhan, which is the epicenter of the outbreak, is also home to more than half of the Top 20 global auto parts makers. The shutdown of these factories has delayed production and deliveries of vehicles like Bharat Stage Four (BS-IV) and BS- VI compliant models. Due to a shortage of vehicle parts, auto production in India is forecast to shrink by 8.3%. This could lead to a loss of at least Rs. 20,000 crores

Consumer Electronics

Beyond finished products, more than 70% of the components needed for TV’s, smartphones and key components of durable consumer goods (washing machines, refrigerators and air conditioners) originate from China. These electronics comprise nearly half of the sales of Amazon and Flipkart and nearly 47% of online sales in India. The disruption to supplies is likely to hamper sales and revenues of these e-commerce sites. Chinese vendors have already raised the prices of some components by more than 2%, and prices of TV panels has jumped by more than 15%.

Coronavirus cases in India

The number of coronavirus cases in India rose to 29, including 16 Italians touring through Rajasthan, the government said on Wednesday, adding all international passengers will now be screened at airports, amid growing concern over the spread of the respiratory infection. A total of six coronavirus cases including one Italian was reported in the country as on Tuesday. With Holi less than a week away on March 10, Prime Minister Narendra Modi, Home Minister Amit Shah, BJP president JP Nadda and Delhi Chief Minister Arvind Kejriwal said they would not celebrate Holi or hold Holi Milan gathering. President Ram Nath Kovind's office also said Rashtrapati Bhavan will not hold any Holi gathering.

Giving a break-up for 28 cases in the country at a news conference, Union Health Minister Harsh Vardhan said one patient is from Delhi, six more, his relatives, are from Agra, one is from Telangana and there are 16 Italians as well as their Indian driver in Rajasthan. The figure includes the first three cases in the country from Kerala last month. The three patients have since recovered.

At his news conference, Vardhan said all international passengers will henceforth be screened at airports. Earlier, travellers from only 12 countries were screened at airports for the contagious disease that has claimed over 3,000 lives and infected more than 90,000 worldwide. Vardhan said the 45-year-old man from Mayur Vihar and six of his relatives from Agra whom he recently visited are being treated at the Safdarjung hospital in the national capital.

Seventeen Indians abroad have been infected, 16 from a cruise ship in Japan "being treated at onshore medical facilities" and one from the United Arab Emirates, the Ministry of External Affairs said. "Experts across the world have advised to reduce mass gatherings to avoid the spread of COVID19 Novel Coronavirus. Hence this year, I have decided not to participate in any 'Holi milan' programme," the Prime Minister tweeted.

As the Centre, the Delhi government and several state governments held a flurry of meetings, e-commerce payment system Paytm said an employee in Gurgaon has tested positive for the coronavirus. A Health Ministry official also confirmed this coronavirus case. The Health Minister said the government has adopted a cluster approach, as part of which health authorities will check and sensitise every household within a three kilometre radius of the house of the infected person.

The government also intends to set up a laboratory in Iran so Indians there can be tested for possible exposure to the virus before being brought back, he said. An estimated 1,200 Indians, mostly students and pilgrims, are in Iran. An inter-ministerial meeting chaired by PK Mishra, the principal secretary to the PM, also decided that all government departments will consult the health ministry before organising conferences and international meets in the country in the coming days.

As Indians all over come to grips with the global epidemic, the health crisis was discussed at a meeting of the Union Cabinet. Union Minister Prakash Javadekar said over six lakh people had been screened for coronavirus symptoms in 21 airports. Briefing reporters, the Information and Broadcasting Minister said more than 10 lakh people entering India from the open borders with Nepal, Bhutan and Myanmar have also been screened. While only the national virology institute based in Pune is fit for conducting coronavirus tests, the government has now set up 15 more labs and is in the process of establishing 19 additional centres, he said. 

Several state governments, including in Rajasthan and Delhi, screened visitors and others for the disease in hotels and guesthouses. With 16 Italian tourists, who came to Rajasthan by road from Delhi, testing positive, the desert state swung into action to contain the infection.

State Health Minister Raghu Sharma said in the assembly that at least 215 people had come into contact with the group. These included 53 people in Jhunjhunu, 14 each in Jodhpur and Jaisalmer, 44 in Bikaner, six in Udaipur and 76 people in Jaipur. Swab samples of 93 people were taken with 51 suspected patients tested negative whereas reports of 41 others are still pending, he said.

In Delhi, CM Kejriwal said efforts are on to check and screen 88 people who came in contact with the Delhi man who tested positive for coronavirus. Kejriwal said a task-force headed by him has been formed to tackle the situation emerging from the coronavirus infection. A coronavirus testing lab will be set up at the Lady Hardinge Hospital and also at the LNJP Hospital if necessary, Kejriwal said. As the coronavirus came perilously close to home and dos and don'ts about the disease were circulated, some advocated that the Indian way of greeting, the Namaste, was the way to go. 

Many people went into panic mode and started stocking up on hand sanitisers and masks.Many shops, including in the national capital, said stocks of both had run out. However, Kejriwal said there is no shortage of masks. In Rajasthan, too, purchase orders have been given for 50,000 personal protective equipment kits and five lakh each of N95 and triple layer masks to deal with the problem, Rajasthan minister Sharma said.

Many schools in the National Capital Region(NCR) said they were fumigating and sanitising their premises. Three schools in Delhi and its adjoining suburbs announced holidays for students and staff as a precautionary measure to prevent spread of the disease while two schools advanced their spring break and others sent out advisories to parents.

(With Agency inputs)