The coronavirus remains the first item on the world agenda. The number of people who lost their lives due to the virus exceeded one thousand at the time of writing. Although coronavirus is seen in many countries outside of China, it is still at a certain point that threatens China and its immediate surroundings. At least for now…
Meanwhile, unprecedented quarantine is applied to China in world history. China is largely disconnected from the outside world. It is understood that, as of February 10, the cogs start to turn slowly in the Chinese economy, the destruction will be high in the 1st quarter growth data. On the other hand, the effects of the isolation of China, which is a very important player in the supply chain in the global economy, started to appear gradually. International technology, automotive and chemical giants have come to the point of stopping production as they could not supply products from China.
In short, unfortunately, loss of lives is rising on the coronavirus side, the epidemic is spreading, and the alarm situation that will threaten trade and economy continues from the Chinese economy to the global supply network.
Alerts coming in a row
Warnings came during the week about the effects of coronavirus on the global economy. “The coronavirus’s negative impact on the Chinese economy will be very high. The negative impact on the world economy has already been greater than the SARS virus,” said British Central Bank President Carney.
The Central Bank of Brazil went on a 25 basis point rate cut last week, stating that the coronavirus will cause a serious slowdown in the global economy, especially the Chinese economy, its largest trading partners, and that commodity prices will fall.
Philippine and Thai Central Banks went on interest rate cuts to prevent the cooling damage that the coronavirus would create in their economies.
FED President Powell, in his speech at the Congress, stated that they are following the effects of the coronavirus soon, and that they are ready to take action if necessary.
In Japan, the production line is 40 percent dependent on Chinese products and 30 percent of the tourists coming to the country are Chinese citizens. The IMF made a statement this week and announced that Japan is one of the countries that will be most affected by the spread of coronavirus after China.
What to expect in the European economy?
One of the regions where the coronavirus will have a negative impact on the economy and trade side is the “European Union”. On the export side of the EU, China is the third largest market after the USA and the UK. The size of exports from the EU to China is 185 billion dollars.
On the other hand, the use of Chinese products in the European manufacturing industry is not as high as Japan or the USA. However, this situation is changing in some sectors. China’s Wuhan region, which is currently under quarantine, is a center used by European automotive companies Peugeot and Renault in their production.
When there is a perception that the coronavirus effects begin to weaken and the epidemic takes control gold, the current panic situation will also dissipate. Life will return to its own flow. However, this virus was a lesson taught to many countries. “It is not a good idea to put eggs in the same basket for whatever reason”
In the last 20 years, China’s low cost production advantage, high production capacity and also being a huge market has attracted the rest of the past 20 years, and even tied most of them to its core.
The coronavirus showed the actors in the global economy very clearly: Players who cannot create a balanced supply chain, spread the production line to different geographies, and do not distribute the market well, can be tested in terms of economy at any time. Today with the coronavirus, tomorrow with cyber attack and the other day with the flood disaster.
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