Estimates published by United Nations Conference on Trade and Development (UNCTAD) said that the slowdown of manufacturing in China due to the coronavirus (COVID-19) outbreak is disrupting world trade and could result in a 50 billion dollar decrease in exports across global value chains. The trade impact of the coronavirus epidemic for India is estimated to be about $348 million and the country figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade, according to a UN report.
India is among the 15 most affected economies due to the coronavirus epidemic and slow down in production in China, with a trade impact of 348 million dollars.
The trade impact for India is less as compared to other economies such as EU, the US, Japan and South Korea. Trade impact for Indonesia is 312 million dollars.
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For India, the trade impact is estimated to be the most for the chemicals sector at 129 million dollars, textiles and apparel at 64 million dollars, automotive sector at 34 million dollars, electrical machinery at 12 million dollars, leather products at 13 million dollars, metals and metal products at 27 million dollars and wood products and furniture at 15 million dollars.
“Besides its worrying effects on human life, the novel strain of coronavirus (COVID-19) has the potential to significantly slowdown not only the Chinese economy but also the global economy. China has become the central manufacturing hub of many global business operations. Any disruption of China’s output is expected to have repercussions elsewhere through regional and global value chains,” UNCTAD said.
Over the last month, China has seen a dramatic reduction in its manufacturing Purchasing Manager’s Index (PMI) to 37.5, its lowest reading since 2004. This drop implies a 2 per cent reduction in output on an annual basis. This has come as a direct consequence of the spread of corona virus (COVID-19).
“The 2 per cent contraction in China’s output has ripple effects through the global economy and thus far has caused an estimated drop of about $50 billion across countries,”UNCTAD said.
“The most affected sectors include precision instruments, machinery, automotive and communication equipment,” it added.
UNCTAD said because China has become the central manufacturing hub of many global business operations, a slowdown in Chinese production has repercussions for any given country depending on how reliant its industries are on Chinese suppliers.
“In addition to grave threats to human life, the coronavirus outbreak carries serious risks for the global economy,” UNCTAD Secretary-General Mukhisa Kituyi said.
“Any slowdown in manufacturing in one part of the world will have a ripple effect in economic activity across the globe because of regional and global value chains,” he said.
Pamela Coke-Hamilton, who heads UNCTAD’s Division on International Trade and Commodities, said for developing economies that are reliant on selling raw materials, the effects could be felt “very, very intensely.” “Assuming that it is not mitigated in the short-term, it’s likely that the overall impact on the global economy is going to be significant in terms of a negative downturn,” she said.
The estimated global effects of COVID-19 are subject to change depending on the containment of the virus and or changes in the sources of supply.
Meanwhile, the extent of the damage to the global economy caused by novel coronavirus COVID-19 moved further into focus as UN economists announced a likely USD 50 billion drop in worldwide manufacturing exports in February alone.
Highlighting the ongoing uncertainty surrounding the economic impact of the epidemic, in which there have been more than 90,000 confirmed cases in more than 70 countries (the majority in China) and over 3,000 deaths, Coke-Hamilton said that US measures “in terms of visitor arrivals, cancelling various meetings” were having a “knock-on effect” in terms of demand.
“So right now, we’re not clear on where it will go – a lot will depend on what happens with COVID-19; if they are able to come up with a vaccine then hallelujah, hopefully it will end very quickly, but if not, the impact can be severe,” she said.