China viral outbreak ‘a global risk’

An image of Salvador Dali looms over a man wearing a protective face mask at a shopping mall in Shanghai. China’s economy faces increasing disruption a month after the coronavirus outbreak which has claimed 636 victims. (AFP)
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Updated 09 February 2020

China viral outbreak ‘a global risk’

  • Tech titan Ericsson pulls out of Barcelona summit over safety fears as Fed warns of threat to world’s supply networks

BEIJING: More than a month after the outbreak of China’s deadly virus, the economic damage is being felt by more businesses and is threatening the outlook for the global economy.

In a report on Friday, the Federal Reserve warned that the virus represents an international risk.

“The recent emergence of the coronavirus,” the Fed said in a semiannual report on monetary policy, “could lead to disruptions in China that spill over to the rest of the global economy.”

Economists warn that the longer the outbreak and the lockdown of Wuhan and other Chinese cities last, the worse the damage will be for a global economy that depends on supply chains that link China with trading partners around the world. The viral outbreak has thrown the travel industry into chaos, threatening billions in losses and keeping millions of would-be travelers at home.

The Trump administration said on Friday that the virus may delay some of the purchases of US goods China is supposed to make under an interim trade deal with the US. But Larry Kudlow, President Donald Trump’s top economic adviser, said that President Xi Jinping had assured Trump that China would meet the purchase target. “Because of their conditions, there may be some delays,” he said.

Ericsson, one of the main suppliers of wireless networks and a rival to Huawei, is pulling out of the Mobile World Congress in Barcelona this month. The Swedish company said that because the show draws thousands of visitors, “even if the risk is low, the company cannot guarantee the health and safety of its employees and visitors.”

The organizers said that Ericsson’s decision will hurt the event, but they do not plan to cancel. Huawei recently said this week it would still attend.

Japanese automaker Nissan Motor Co. said that sales in China in January by the company and its local partners fell 11.8 percent from a year earlier to 118,143 vehicles due to the virus outbreak and the extension of the Lunar New Year holiday. Nissan said earlier it was considering reopening most of its factories in China on Monday but would wait until at least Feb. 14 for facilities in and around Wuhan, the city at the center of the outbreak. 

Toyota said it was keeping its factories in China closed for an extra week, and will decide then whether to resume production. Toyota Motor Corp. has 12 plants in China. Honda said its three auto-assembly plants in Wuhan would stay closed through Feb. 13.

Japanese clothing retailer Uniqlo said it has closed 350 stores, or about half, of its 750 outlets in China, to comply with shutdowns of public transportation and closures of malls. Parent company Fast Retailing says about 20 percent of its sales come from China. British firm Burberry, which gets about 40 percent of its revenue from China, shut 24 of 64 stores in China, and said that footfall had dropped by as much as 80 percent. The impact in Hong Kong is bigger than from the protests, which had halved sales there in the last quarter.

L’Oreal joined the growing list of beauty brands expressing concern over the blow to sales due to travel restrictions that are reducing demand at duty free shops. The company said it expected a “temporary impact” on Asia’s beauty market, but past experience suggests that “after a period of disturbance, consumption resumes stronger than before.”

Lebanon plunged into ‘deliberate depression’: World Bank

Updated 01 December 2020

Lebanon plunged into ‘deliberate depression’: World Bank

  • The fall 2020 edition of the Lebanon Economic Monitor predicted the economy will have contracted by 19.2 percent this year
  • Lebanon’s economy started collapsing last year as a result of years of corrupt practices and mismanagement

BEIRUT: Lebanon’s economy is sinking into a “deliberate depression,” the World Bank said Tuesday in a damning report stressing the authorities’ failure to tackle the crisis.
The fall 2020 edition of the Lebanon Economic Monitor predicted the economy will have contracted by 19.2 percent this year and projected a debt-to-GDP ratio of 194 percent next year.
“A year into Lebanon’s severe economic crisis, deliberate lack of effective policy action by authorities has subjected the economy to an arduous and prolonged depression,” a World Bank statement said.
Lebanon’s economy started collapsing last year as a result of years of corrupt practices and mismanagement.
The crisis was made worse by a nationwide wave of anti-government protests that paralyzed the country late last year and the Covid-19 pandemic this year.
The August 4 Beirut port blast, one of the largest non-nuclear explosions in history, brought the country to its knees and further fueled public distrust.
“Lebanon is suffering from a dangerous depletion of resources, including human capital, with brain drain becoming an increasingly desperate option,” the World Bank warned.
In 2020, Lebanon defaulted on its debt, banks imposed capital controls and inflation has reached triple-digit rates, dragging the country into its worst ever economic crisis.
Instead of taking emergency measures to rescue the economy, Lebanon’s political elite has continued to dither and bicker.
The previous government headed by Hassan Diab failed to adopt ambitious policies to tackle the crisis. It resigned under pressure over the blast nearly four months ago and a new cabinet has yet to be formed.
“Lack of political consensus on national priorities severely impedes Lebanon’s ability to implement long-term and visionary development policies,” said Saroj Kumar Jha, World Bank regional director.
He called for the quick formation of a new government capable of implementing short-term emergency measures and addressing long-term structural challenges.
“This is imperative to restore the confidence of the people of Lebanon,” he said.
An annual index compiled by Gallup that tracks people’s experience of stress and sadness said “no other country in the world saw negative experiences skyrocket across the board as much as Lebanon.”
The Negative Experience Index’s data was collected before the Beirut port blast, Lebanon’s worst ever peace time disaster.