Economic Implications of Corona Virus 🦠

China recently experienced coronavirus outbreak (CoV) and this was first reported by World Health Organization (WHO) on the 31st of December 2019. Coronavirus is largely family of viruses that cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). CoV can be transmitted between animals and people and it can give rise to a variety of symptoms in different animals. Some strains causes diarrhea in livestock’s such as pigs and turkeys and others. There is an expectation that the coronavirus outbreak could disrupt the China’s global trade.

The outbreak of this virus have resulted in total ban of any movement of goods and services including agricultural commodities across the borders and also locally, and this will mean that trade might be heavily affected. In the current situation, there are business transactions that are taking place in China and there are uncertainties to the companies or countries that are having business in china. . The restrictions might be a problem for Chinese businesses that need to move agricultural products and goods across its borders. Some imports and exports such as livestock and livestock products may be disrupted and might become more expensive. Additionally, these restrictions will not only affect China but also its trading partners that import from or export to china. The state of economic growth is at risk especially due to affected trade. 

South Africa and China have been working together according to various trade agreements, and these to some extent have led to increased trade between these two countries. China is the top importer from and top exporter to South Africa and considered fastest growing trading partner. If the china’s economic growth is negatively affected, its demand for exports (mostly commodities) from South Africa is also likely to decline. As a result, the flow of goods and services between South Africa and china would be the main transmission channel through which SA’s real economy will be affected. In 2019, South African exported about R136 billion value of agricultural products to the world market and 5.8% of the total agricultural exports are imported by China. Therefore, it is worth noting that South Africa’s market share in China might be affected due to trade restrictions that might be imposed by WTO if the virus is not contained. Approximately, 30.4% share of shorn wool destined to China might be affected and resulting in downward trend.

On the other side, China and USA have been under negotiations to formulate a trade agreement that will benefit both countries. The economic impact of CoV is likely to be expanded by the on-going US-China trade frictions. Trade between the US and China has already been disturbed by trade wars and imposition on tariffs on US and Chinese exports. Although tensions have been eased by a signing of the phase-one trade deal, the underlying dispute has had an important impact in disrupting supply chains and underlying exports. The bulk of existing tariffs are still in place and maintaining important stresses in their economy. Chinese companies are in a more vulnerable position which will make it more difficult to adjust and respond to a fresh crisis such as CoV outbreak. The global economy overall is liable to be vulnerable.

The author/contributor:
Lucius Phaleng
Agricultural Economist
Trade (NAMC)

Economic Implications of Corona Virus 🦠
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