Coronavirus and the World Economy
On 27 February I wrote a report about the topic if the coronavirus could trigger a world recession. I concluded that the possibility exists and the early indicator (the Baltic Dry Index) already had a turning point in August 2019 already and the stock exchanges started to slide since 22 February, expecting a spread outside China with the possible economic consequences. We have 14 days later more information on the spread of the coronavirus.
Table 1: Coronavirus cases – 27 January – 12 March
|Region/Country||Cases27 Jan||Cases27 Feb||Cases12 Mar|
|China||4 581||78 499||80 796|
|Rest of the World||–||2 569||23 495|
|Total||4 581||82 183||133 311|
The cases stabilized in China and it is spreading more in Europe than the rest of the World.
Table 2: Coronavirus deaths – 27 January – 12 March
|Region/Country||Deaths27 Jan||Deaths27 Feb||Deaths12 Mar||Death ratio as% of cases|
|China||106||2 747||3 169||3.9%|
|Rest of the World||–||43||586||2.5%|
|Total||106||2 804||4 898|
More death cases were reported in the last 14 days in Europe than the rest of the World and China. China has currently gained control against the further spread of the virus and one can assume that from Monday on their factories will regain normality. In Europe and the US fear has got the upper hand and stock markets are discounting the future economic fallout.
Are we moving into a recession? Individual stock exchanges might have a bias towards the domestic economy and therefore measuring the rise and fall in the stock exchanges in 23 developed economies can give a better indication of the ‘health’ of the World economy measured as the MSCI World Index. The Dow Jones (New York stock exchange) has a weight of 63%, based on market capitalisation. The index below signals that the markets a very nervous and that we enter a world recessionary phase.
Source: MSCI Index
The MSCI index was at 2401 on 22 February 2020 and closed yesterday at 1767, a fall of 26%. This morning the Dow and S&P 500 had their biggest one-day decline since 1987 and in early morning trade the Nikkei 225 was already 8.5% lower. A blood bath in the markets.
From selected commodity prices one can gauge the possible impact on the Namibian economy:
Table 3: Selected international commodity prices
|Energy: Brent oil||-39.83%||-48.70%|
Source: Trading economics
The N$ is currently trading 16.13 to the US Dollar and therefore the fall in the commodity prices can probably partly be absorbed by the weakening Namibian Dollar.
Compiled by: Rainer Ritter
13 March 2020