Coronavirus and the World Economy
The coronavirus has arrived in the most remote place of the World and 198 countries are affected. Namibia has now 7 cases and South Africa 706. Even China reported 46 new cases this morning meaning that a standstill of new cases has not occurred yet; we are not at a turning point regarding China. Tomorrow the Khomas and Erongo region will go into a lockdown, because all seven cases had been reported in both regions. The latest cases and deaths are the following:
Table 1: Coronavirus cases – 27 January – 26 March
|Region/Country||Cases27 Jan||Cases27 Feb||Cases12 Mar||Cases19 Mar||Cases26 Mar|
|China||4 581||78 499||80 796||80 928||81 285|
|Europe||–||556||29 020||93 292||246 327|
|Rest of the World||–||2 569||23 495||48 862||143 805|
|Total||4 581||82 183||133 311||223 082||471 417|
On Tuesday President Trump announced that by Easter the US economy will be open again and his view is that it is a temporary phenomenon. Politicians must make sometimes some statements to inspire hope, but in these daunting times a good portion of realism is required. Trump knows that the state of the economy will play a role in the US elections end of the year and voters will not forget when optimism is misplaced. Messages to the public must be encouraging but also truthful. From the middle of March the epicentre of the coronavirus has shifted from China to Europe and by next week the rest of the World will probably the epicentre of Europe. The total number of cases reached nearly half a million today the total deaths more than 21 000.
Table 2: Coronavirus deaths – 27 January – 26 March
|Region/Country||Deaths27 Jan||Deaths27 Feb||Deaths12 Mar||Deaths19 Mar||Deaths26 Mar||Death ratio as% of cases|
|China||106||2 747||3 169||3 245||3 287||4.0%|
|Europe||–||14||1 143||4 201||14 143||5.7%|
|Rest of the World||–||43||586||1 703||3 865||2.7%|
|Total||106||2 804||4 898||9 149||21 295||4.5%|
If the current trend continues the total number of deaths will be around 50 000 in a weeks’ time. Italy and Spain have today about 52% of the number of deaths reported in the whole World.
The real economic costs are spiralling and a World recession has become a reality, much worse than 2009. The latest estimates are predicting a contraction of at least 10% in Q1 of China’s GDP and it could be much worse by other estimates.
The World economy will move into a severe recession as the MSCI World Index (below) is signalling.
Source: MSCI Index
The MSCI index was at 2401 on 22 February 2020 and closed yesterday at 1743, a fall of 27.5%. Each country in the developed World is announcing stimulus packages and the Dow improved on Tuesday and Wednesday after markets were positive about the stimulus package in the US. Futures and Asian markets opened negative this morning which could indicate another bear phase.
The Namibian Government has not announced policies yet on the economic fallout, but seemingly they are busy thinking about it. This is the main weakness of Namibia, the indecisiveness on how to assist the private sector in these daunting times. The economic implications are totally underestimated otherwise the word ‘urgency’ would have been a factor in the public economic sphere. The NCCi is also sleeping because ‘organized business’ is disorganized. Apart from the Economic Association of Namibia (EAN) who published a paper this week, quietness or perplexing incompetence is the watchword.
Table 3: Selected international commodity prices
|Winners for Namibia|
|Energy: Brent oil||-48.51%||-60.39%|
Source: Trading economics. 26 March 2020
The N$ is currently trading 17.37 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
26 March 2020