How the coronavirus hits the world economy

A few weeks ago we first took a look at how a bat (possible origin of the coronavirus) could have a butterfly effect on the world economy.

China accounts for about a fifth of global economic output, a third of global oil imports, and the largest share of global exports. That means that any time the Chinese economy shudders or stumbles, the shockwaves circle the globe. And China is most certainly shuddering.


So far, the country has seen more than 70,000 cases of coronavirus, with close to 2,000 deaths. Some 720 million people there are on residential lockdowns to stop its spread. That means people aren't out buying things or producing things in factories and offices.

This matters because:

China is a leading market for the world's largest consumer goods companies. The quarantine and lockdown restrictions have forced many of those businesses to go dark in China for now. Apple, for example, earlier this month closed all its stores in China, its second largest market. Starbucks, similarly dependent, has closed half its shops in the country. Estee Lauder's numbers are getting smudged and Haagen-Dazs sales are melting. Here's a look at what a few dozen of the world's leading consumer and services companies are saying.

China's oil imports, the largest in the world, are taking a hit as the virus crimps travel and industrial production there, knocking down China's oil purchases by several hundred thousand barrels per day. This is bad news for countries that depend on oil exports, like Nigeria, Africa's largest producer, where growth forecasts are already being trimmed.

China is the world's largest exporter, and with many of the country's major factories partly or totally shuttered, global businesses that rely on parts and labor in China are scrambling to figure out alternatives. DHL, who know a thing or two about supply chains, warned earlier this month of "serious disruptions." More than 30 scheduled shipping services from China to Europe and the US have been cancelled. This affects everything from your smartphone, to your vacuum cleaner to your (or your kids') video game consoles. The resourceful folks of Jaguar Land Rover say they are getting critical parts out of China in suitcases.

The good news is, after it gets worse, it generally gets better – when China's stores, factories, and travel links reopen, there will likely be a mini boom as everyone gets back to shopping and working and exporting. The bad news is: we still don't know when that might be, and with the number of cases still rising, it could be a while.

Amid the current need to continually focus on the COVID-19 crisis, it is understandably hard to address other important issues. But, on March 31st, Washington Governor Jay Inslee signed landmark facial recognition legislation that the state legislature passed on March 12, less than three weeks, but seemingly an era, ago. Nonetheless, it's worth taking a moment to reflect on the importance of this step. This legislation represents a significant breakthrough – the first time a state or nation has passed a new law devoted exclusively to putting guardrails in place for the use of facial recognition technology.

For more on Washington's privacy legislation, visit Microsoft On The Issues.

Over the past decade or so, the European Union has weathered the global financial crisis, a migrant crisis, and the rise of populist nationalism. Sure, it's taken its fair share of bumps and bruises along the way, but the idea of a largely borderless Europe united by common democratic values has survived more or less intact.

Then came the coronavirus. The global pandemic, in which Europe is now one of the two main epicentres, is a still-spiralling nightmare that could make those previous crises look benign by comparison. Here are a few different ways that COVID-19 is severely testing the 27-member bloc:

The economic crisis: Lockdowns intended to stop the virus' spread have brought economic activity to a screeching halt, and national governments are going to need to spend a lot of money to offset the impact. But some EU members can borrow those funds more easily than others. Huge debt loads and deficits in southern European countries like Italy and Spain, which have been hardest hit by the outbreak so far, make it costlier for them to borrow than more fiscally conservative Germany and other northern member states. In the aftermath of the global financial crisis, this imbalance nearly led the bloc's common currency, the Euro, to unravel.

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The coronavirus pandemic is already wreaking havoc on developed countries where residents are able to socially distance themselves and self-quarantine. So what would happen if the contagion spread amongst the most vulnerable populations – refugees and asylum seekers in jam-packed camps? Many in refugee camps don't have access to running water or soap, which would make it all but impossible to slow the spread of the disease by washing their hands. Human rights advocates are bracing for a potential deadly outbreak at one these sites, where even ordinary infections spread like wildfire. Here's a look at some of the world's largest refugee camps, where the stakes are highest.

Ian Bremmer provides his perspective in (slightly) more than 60 seconds: What's the coronavirus update? And when will a state of normalcy return?

Oh, that's easy. A state of normalcy will not return when we start returning to work. I certainly think that the decision by President Trump to push out to the end of April was rational. I think in certain parts of the country, it's likely to be much longer. By that, I think New York City, maybe June is when you start really seeing end of quarantines and people going back to work. But when you don't have a vaccine, the likelihood that people are going to trust going to sports and concerts and bars and restaurants or sitting in the middle seat and bringing their family to Disney is going to take a long time. I think really you need a vaccine at scale before that happens and that's well over a year out. Why? I think that all the numbers you're seeing right now about the strong rebound of the economy in the third and fourth quarter is over optimistic. And instead, you're going to need significant additional bailouts come summer, which the Americans will be able to do. Emerging markets will not. And I'm much more worried about what happens to them going forward.

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Ben White, Chief Economic Correspondent for Politico, provides his perspective on the coronavirus-related news in US politics: What's the coronavirus update? Are we bending the curve?

No, we're not. Still exponential growth in places like New Orleans and Detroit. New York City is still a mess. So, unlike South Korea, we have not started to bend the curve.

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