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Coronavirus outbreak starts to look more like worldwide economic crisis
Published Friday, February 28, 2020 5:58AM EST Last Updated Friday, February 28, 2020 11:30PM EST
NEW YORK -- The coronavirus outbreak began to look more like a worldwide economic crisis Friday as anxiety about the infection emptied shops and amusement parks, cancelled events, cut trade and travel and dragged already slumping financial markets even lower.
More employers told their workers to stay home, and officials locked down neighbourhoods and closed schools. The wide-ranging efforts to halt the spread of the illness threatened jobs, paychecks and profits.
"This is a case where in economic terms the cure is almost worse than the disease," said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics. "When you quarantine cities ... you lose economic activity that you're not going to get back.'
The list of countries touched by the illness climbed to nearly 60 as Mexico, Belarus, Lithuania, New Zealand, Nigeria, Azerbaijan, Iceland and the Netherlands reported their first cases. More than 83,000 people worldwide have contracted the illness, with deaths topping 2,800.
The head of the World Health Organization announced that the risk of the virus spreading worldwide was "very high," citing the "continued increase in the number of cases and the number of affected countries."
U.N. Secretary-General Antonio Guterres urged all governments to "do everything possible to contain the disease."
"We know containment is possible, but the window of opportunity is narrowing," the U.N. chief told reporters in New York.
The economic ripples have already reached around the globe.
Stock markets around the world plunged again Friday. On Wall Street, the Dow Jones index took yet another hit, closing down nearly 360 points. The index has dropped more than 14% from a recent high, making this the market's worst week since 2008, during the global financial crisis.
The effects were just as evident in the hush that settled in over places where throngs of people ordinarily work and play and buy and sell.
"There's almost no one coming here," said Kim Yun-ok, who sells doughnuts and seaweed rolls at Seoul's Gwangjang Market, where crowds were thin as South Korea counted 571 new cases -- more than in China, where the virus emerged. "I am just hoping that the outbreak will come under control soon."
In Asia, Tokyo Disneyland and Universal Studios Japan announced they would close, and events that were expected to attract tens of thousands of people were called off, including a concert series by the K-pop group BTS. The state-run Export-Import Bank of Korea shut down its headquarters in Seoul after a worker tested positive for the virus, telling 800 others to work from home. Japanese officials prepared to shutter all schools until early April.
In Italy -- which has reported 888 cases, the most of any country outside of Asia -- hotel bookings are falling, and Premier Giuseppe Conte raised the spectre of recession. Shopkeepers like Flavio Gastaldi, who has sold souvenirs in Venice for three decades, wondered if they could survive the blow.
"We will return the keys to the landlords soon," he said.
The Swiss government banned events with more than 1,000 people, while at the Cologne Cathedral in Germany, basins of holy water were emptied for fear of spreading germs.
In a report published Friday in the New England Journal of Medicine, Chinese health officials said the death rate from the illness known as COVID-19 was 1.4%, based on 1,099 patients at more than 500 hospitals throughout China.
Assuming there are many more cases with no or very mild symptoms, the rate "may be considerably less than 1%," U.S. health officials wrote in an editorial in the journal. That would make the virus more like a severe seasonal flu than a disease similar to its genetic cousins SARS, severe acute respiratory syndrome, or MERS, Middle East respiratory syndrome.
Given the ease of spread, however, the virus could gain footholds around the world and many could die.
"It's not cholera or the black plague," said Simone Venturini, the city councillor for economic development in Venice, Italy, where tourism already hurt by historic flooding last year has sunk with news of virus cases. "The damage that worries us even more is the damage to the economy."
Europe's economy is already teetering on the edge of recession. A measure of business sentiment in Germany fell sharply last week, suggesting that some companies could postpone investment and expansion plans. China is a huge export market for German manufacturers.
In the U.S., online retail giant Amazon said Friday that it has asked all of its 800,000 employees to postpone any non-essential travel, both within the country and internationally.
The chairman of the Federal Reserve, Jerome Powell, said that the U.S. economy remains strong and that policymakers would "use our tools" to support it if necessary.
Larry Kudlow, the top economic advisor to President Donald Trump, told reporters that the selloff in financial markets may be an overreaction to an epidemic with uncertain long-term effects.
"We don't see any evidence of major supply chain disruptions. I'm not trying to say nothing's happening. I think there will be impacts, but to be honest with you, at the moment, I don't see much," Kudlow said.
The pain was already taking hold in places like Bangkok, where merchants at the Platinum Fashion Mall staged a flash mob, shouting "Reduce the rent!" and holding signs that said "Tourists don't come, shops suffer."
Tourist arrivals in Thailand are down 50% compared with a year ago, according Capital Economics, a consulting firm.
Kanya Yontararak, a 51-year-old owner of a women's clothing store, said her sales have sunk as low as 1,000 baht ($32) some days, making it a struggle to pay back a loan for her lease. She's stopped driving to work, using public transit instead. She also packs a lunch instead of buying one and is cutting her grocery bills. The situation is more severe than the floods and political crises her store has braved in the past.
"Coronavirus is the worst situation they have ever seen," she said of her fellow merchants.
Economists have forecast global growth will slip to 2.4% this year, the slowest since the Great Recession in 2009, and down from earlier expectations closer to 3%. For the United States, estimates are falling to as low as 1.7% growth this year, down from 2.3% in 2019.
But if COVID-19 becomes a global pandemic, economists expect the impact could be much worse, with the U.S. and other global economies falling into recession.
"If we start to see more cases in the United States, if we start to see people not travelling domestically, if we start to see people stay home from work and from stores, then I think the hit is going to get substantially worse," said Gus Faucher, an economist at PNC Financial.
Some saw dollar signs in the crisis. Twenty people were arrested in Italy for selling masks they fraudulently claimed provided complete protection from COVID-19. Police said they were selling them for as much as 5,000 euros ($5,520) each.
China, though hardest hit, has seen lower numbers of new infections, with 327 additional cases reported Friday, bringing the country's total to 78,824. Another 44 people died there for a total of 2,788.
South Korea has recorded 2,337 cases, the most outside of China. Emerging clusters in Italy and in Iran, which has had 34 deaths and 388 cases, have led to infections of people in other countries. France and Germany were also seeing increases, with dozens of infections.
"I think this is a reality check for every government on the planet," WHO Emergencies Program Director Michael Ryan said Friday after the agency raised its alert level. "Wake up, get ready. This virus may be on its way."
Associated Press writers Deb Riechmann in Washington, Joseph Pisani and Edith M. Lederer in New York, Carla K. Johnson in Seattle, Matt Sedensky and Preeyapa Khunsong in Bangkok, Hyung-jin Kim and Tong-hyung Kim in Seoul, South Korea, Foster Klug and Mari Yamaguchi in Tokyo, Renata Brito and Giada Zampano in Venice, Italy, Frances D'Emilio in Rome, Angela Charlton in Paris and Frank Jordans in Berlin contributed to this report.