Fears of a possible coronavirus pandemic are sweeping the world.
But what impact will this have on the economy?
A report by Scotiabank Economics, released on Monday, said that with the first case now reported in Canada, many are recalling the 2003 SARS pandemic (Severe Acute Respiratory Syndrome) where Canada was one of the epicentres.
“Arguably the biggest (economic) lesson from that experience is that fear is the biggest risk to the outlook. The impact of the SARS pandemic on the Canadian economy is difficult to estimate, confounded as it was by the slowing US economy, the invasion of Iraq and other events, but the Bank of Canada estimated a -0.6 (percentage point) hit to annualized growth in Q2-2003, or just over 0.1 per cent on the level of GDP,” said the report.
“While it is premature to predict the path of today’s coronavirus outbreak, we estimate that a SARS-equivalent pandemic today could have a similar impact on the Canadian economy with an estimated hit of just over 0.1 per cent on the level of GDP by mid-2020, at which point a pandemic should be contained. This estimate is subject to a significant degree of uncertainty with risks skewed to a potentially larger impact.”
The report said SARS gripped the world in fear in early 2003. The World Health Organisation’s final tally was 8,096 probable cases worldwide, resulting in 774 deaths including 43 in Canada.
“If the current outbreak reaches the severity of the SARS, it would likely still have a similarly small and transitory impact on the Canadian economy. Assuming peak severity in the first half of 2020, the main impact on Canada would likely be indirect, from lower commodity prices and a drop-off in travel-related industries,” said the Scotiabank report.
“In our simulations using the Scotiabank Global Macroeconomic Model, the combined impact of a four per cent lower oil price and the likely disruption to tourism and air travel could leave the level of Canadian GDP lower by just over 0.1 per cent by mid-2020, before the virus is brought under control and commodity prices and growth rebound, similar to the BoC’s (Bank of Canada’s) estimate for the impact from the SARS outbreak. The annualized GDP growth is expected to be weaker by about 0.3 (percentage points) in 2020 Q1–Q2.
“In the simulation we assume that the spread of the virus could result in a disruption to Canadian air travel and tourism of the size observed in 2003 Q2.”
Mario Toneguzzi is a business reporter in Calgary.
The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.
