Coronavirus Could Cost China’s Economy Up to $14 Billion, Says Report
Samantha McDonald
Business Editor
The deadly coronavirus has spread throughout the world, and in its epicenter of China, the outbreak has led to the shutdown of transportation, retail stores and other businesses.
According to a new study by Coresight Research, which cited an early estimate from the Economist Intelligence Unit, the virus could cut China’s gross domestic product 0.5 to 1 percentage point off of its estimated 5.9% GDP growth in 2020 — a loss of roughly $7.2 billion to $14.3 billion. The illness struck at a crucial time for the Chinese economy, with the Lunar New Year on Saturday marking a major spending and travel period in the region.
Many retailers have temporarily shuttered stores in China, particularly in the heavily affected Hubei province. Researchers for the firm reported observing hourlong wait times at supermarkets and temporary closures for major retail shops, such as Uniqlo and Ikea as well as some of those owned by Louis Vuitton and Fendi parent LVMH. (The report did not specify which stores.)
“Most recently, our colleagues in China report that grocery store shelves are bare, having been cleaned out of staples by consumers planning to stay home to weather the situation,” wrote Coresight CEO and founder Deborah Weinswig. “The current environment is likely to be negative for brick-and-mortar retail, travel (domestically within China and to neighboring countries), restaurants and gaming, as consumers stay home.”
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The firm also noted that other companies including Facebook, PriceWaterhouseCoopers and Shiseido have also requested that employees work from home or restricted business trips to China altogether. As such, researchers are expecting less travel in China to adversely affect tourism and in-store retail sales across the country.
As a result, “retailers should focus on online and social media, as consumers can shop from home and are highly likely to do so,” Weinswig said, adding that e-commerce is forecasted to account for 44% of retail sales this year.
Prior to the outbreak, Coresight had predicted $156 billion in retail and food-service sales during the Lunar New Year holiday shopping period, including decorations and gifts as well as clothing and accessories. Beijing officials have extended the Lunar New Year break, during which Chinese citizens refrain from work, to Feb. 3 in an effort to halt the spread of the virus.
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