Coronavirus which spread from Wuhan, China until February 19, 2020 has infected more than 75,000 people and caused the death of up to 2,000 people. As the second largest economy in the world, China is expected to experience short but sharper economic shocks than expected. This shock will also have an impact throughout the world. This article will discuss how the impact of coronavirus (Covid-19) on the world economy including Indonesia
THE IMPACT OF CORONAVIRUS IN CHINA’S ECONOMY
China’s GDP in the first quarter of 2020 is expected to fall to 4% (predicted by the Peterson Institute for International Economics). Before Coronavirus broke out, China’s GDP was in the range of 6%. While the S&P estimates that Coronavirus can reduce China’s GDP by around 5% this year, which has the biggest impact in the first quarter, and a rebound in the third quarter.
THE IMPACT OF CORONAVIRUS IN THE WORLD ECONOMY
Analysts estimate Coronavirus can reduce 40 to 50 basis points from the US economy (KPMG source).
It is estimated that the most affected by Coronavirus in the world economy, especially in the travel industry (travel) because flights to and from China are many delayed / rejected. Also in the technology and manufacturing industries (for example supply chain disruption in Foxcoon, Apple, etc.).
THE IMPACT OF CORONAVIRUS IN INDONESIA’S ECONOMY
Actually the Indonesian economy has seen a decline in 2019, like the economic downturn in other Southeast Asian countries. Indonesia’s GDP in 2019 is at 5.02%, the lowest in the last 3 years, down from 5.17% in 2018 (source of the Central Statistics Agency). This figure does not yet include the impact of Coronavirus, because it only broke out in December 2019.
China’s economic downturn will have an impact on several sectors for example:
The fall in commodity prices is due to falling demand from China. So far, China is one of the main destinations of Indonesia’s exports.
Weakening tourism sector. Popular tourist destinations such as Bali will be affected by the refusal of flights to and from China
Manufacturing disruption, supply from factories is still widely imported from China
In the consumer sector, many products are still imported from China. The fall in imports from China has the potential to increase inflation which will ultimately be felt by Indonesian consumers
It is estimated that there will be a 0.3% reduction in Indonesia’s GDP growth if China’s economic growth drops to 1% -2% (source of the Indonesian Ministry of Economy)
The decline in economic growth will also be seen in the Indonesian stock market. The impact of Coronavirus on the Indonesian economy will only be seen clearly in the first quarter. So as a stock investor it is advisable to get ready on all possibilities. Hopefully the spread of Coronavirus successfully tested.