Containing the coronavirus: What’s the risk to the global economy?

On Feb. 24, stock indices tumbled, spooked by reports that the coronavirus outbreak which emerged in China is spreading to countries including Italy, Iran and South Korea. 

Two people outside in a public crowd wearing face masks

The markets’ movements mirror the uncertainty that prevails and persists not just in the U.S. but all over the world. Several weeks into the coronavirus outbreak that has brought the world’s second largest economy to its knees, some of the most basic aspects of the virus remain unknown. It’s not yet clear how widely beyond China COVID-19 will spread; this week, numbers of infected individuals have surged outside China. Still, exactly how it is transmitted, how easily, and how lethal it might be are aspects of this coronavirus that remain to be uncovered, according to Penn scientists.

As the human toll mounts, so does the economic damage. The business realm, of course, tends to shudder in the face of uncertainty, and right now, with reports on the seriousness of the coronavirus evolving each day if not each hour, the eyes of commerce are on epidemiology.

“This has many economic implications,” says Wharton management professor Mauro Guillen. “It has implications not just for China but for the entire world. The world depends on Chinese growth,” he says, citing both the country’s supply-chain role and consumer buying power. Still, he notes: “It is unclear how much impact in the end this is going to have.” 

However, what is clear is if politics and trade wars emerged as uncertainties in recent years, now a third leg in the stool holding up global confidence has suddenly gone wobbly.

Read more at Knowledge@Wharton.