As thousands of new cases emerge around the world each day, it is not only the stock markets that take a hit from the spread of novel coronavirus infections.
The heightening fear of being the next patient among people proves such a massive impediment to all sorts of economic activity. And assuming that the U.S. won’t see as much economic harm as elsewhere where the respiratory illness seems, for now, to be a bigger physical threat would only be naive.
In this article, we discuss the possible impact of the COVID-19 outbreak on the economy nationwide and here in Washington, D.C. in particular.
From Hearsay to Pandemic
When people started to fall seriously ill because of the virus in Wuhan, the origin of the contagion in China, early December, Chinese authorities dismissed it as another minor health issue. They were terribly wrong.
By the time Beijing introduced strict measures to contain the spread of the disease over a month later, the number of infections had neared 100 and deaths had already begun. More tragedies quickly followed.
From the day China sealed off Wuhan from the rest of the world in late January, the virus has spread to over a 140 countries and territories around the world.
As of mid-March, only days after the World Health Organization (WHO) declared the outbreak a “pandemic,” the number of cases topped 175,000 and deaths were around 7,000 worldwide, according to Johns Hopkins University’s Coronavirus Resource Center.
After China, Italy paid the second highest price. The southern European nation accounted for some 25,000 cases and over 1,800 deaths by March 16.
Elsewhere in Europe, though, the situation was only relatively better. France, Spain and Germany reported more than 20,000 cases in total. Such developments have prompted the WHO to announce that the epicenter of the pandemic has now shifted from China to Europe.
Virus in US: How Many Cases & Where
As the virus took other nations around the world by storm, the U.S. couldn’t remain entirely immune.
Its first case emerged in the state of Washington on January 20: A 35-year-old male who had recently traveled from Wuhan. That patient eventually recovered, though only after undergoing an intensive treatment for about two weeks in a hospital.
Not everyone, however, was as lucky as him. By mid-March, there were some 4,000 cases, and the death toll exceeded the 50 mark nationwide. In the D.C. metro area, the number of people known to have contracted the virus was almost 100.
In response, President Donald Trump has first announced that the U.S. customs won’t grant entry to non-American travelers from Europe’s borderless Schengen-area.
The sweeping measures concerned all flights from a total of 26 nations including Italy, Germany, France and Spain for a month. He later raised the U.S. alarm to declare a national emergency over the contagion and added the U.K. and Ireland to the blacklist of European nations.
In the capital city, likewise, D.C. Mayor Muriel Bowser has declared a state of emergency and a public health emergency, which made it easier for her to tap into federal assistance and impose further measures.
Recession Fears Prevail in Financial Markets
On the back of the disease’s rapid escalation, financial markets have had their worst couple of weeks in years. Global stocks have already slashed trillions of dollars because of the outbreak and analysts believe the worst is yet to be over.
In the U.S., pensive faces are all over Wall Street. As the market turmoil shows no sign of ending, investors are ditching stock holdings and seeking shelter in safer, more liquid assets.
In the process, March 11 marked a milestone. It was the day America’s Dow Jones industrial average index plunged into a Bear Market after slumping another 5.8 percent. That brought it to a territory 20 percent off its peak a month ago.
The S&P 500 index narrowly avoided falling into the same category though it still slid by a disappointing 4.9 percent to a one-year low the same day. Nonetheless, that was nowhere near the end of the rout in U.S. stocks. The following day, both indices fell by over 9 percent, recording their worst single-day losses since 1987.
Thanks to President Trump’s declaration of a national emergency and freeing up $50 billion to combat the virus, stocks recouped some of their early losses. It was, however, still far from clear how sustainable their rebound would be.
Businesses to Write Off Billions of Dollars
Outside the financial markets, the virus is infecting entire sectors and industries, as well.
Fear is the main mechanism with which it deals its worst economic blow. As governments announce drastic restrictions to stem the spread of the virus, such as closing their borders to international travel, its economic cost is exploding.
During all that fuss, the authorities’ focus is understandably on saving lives first. Some say, however, that some of those measures have gone too far.
Take President Trump’s travel ban on 28 European nations, for instance. According to U.S. Travel Association economists, some one million international visitors flying from Europe entered the United States in March 2019.
That accounted for a third of all overseas arrivals to the country. Now without them, the U.S. is likely to forego a huge tourism revenue. Some $3.5 billion that those visitors spent here around this time last year could serve a reference to calculate the possible loss.
“Temporarily shutting off travel from Europe is going to exacerbate the already-heavy impact of coronavirus on the travel industry and the 15.7 million Americans whose jobs depend on travel,” said U.S. Travel Association President and CEO Roger Dow in a March 12 statement.
As it is still not fully clear how the virus spreads even a quarter year into the outbreak, it is also uncertain when it will stop infecting more people. That we are also at least a year away from having at hand a successful vaccine against it adds to the common pessimism surrounding the economic projections. That is why many “what ifs” enter the calculations.
In the hypothetical best-case scenario, the governments’ responses to the outbreak prove effective and the virus stops threatening more lives in the next couple of weeks. Even then, the damage to the U.S. economy in the form of consumers’ absence in the market, less travel and spending, etc. as well as weaker productivity and lay-offs on the part of the businesses could be in the order of billions of dollars.
But if the world’s recovery takes longer as widely feared, the discussion on the possible impact to economies worldwide, in the U.S. and in the District will have to take even an uglier form. What we are looking at might then be a bottomless pit.
Obviously, any weaker economic activity will also mean smaller tax revenues for governments.
D.C.’s Chief Financial Officer Jeffrey S. DeWitt, for instance, has warned in a recent report that the capital city’s government alone could incur a loss of $52 million in tax revenue this year because of COVID-19. How bigger the same figures could be at the national and global levels is anybody’s guess.
What is Next?
In order to prop up economic activity and mitigate the global contagion’s impact on their economies, governments are introducing large stimulus packages while central banks around the world ease borrowing costs and inject oceans of liquidity into markets.
Regardless of those supportive steps, though, the fundamental question remains annoyingly unanswered: When will the outbreak be over?
While fear, therefore, spreads even faster than the virus at these highly uncertain times, people are likely to continue limiting their day-to-day activities. And if this “horror movie” situation worsens, people will start to avoid going to malls, restaurants, gyms and theaters, etc. altogether until they feel safe again to do so.
The economic damage at home and abroad, then, will have only one way to go: Up!