United Nations: The trade impact of the coronavirus epidemic for India is estimated to be about 348 million dollars and the country figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade, according to a UN report.
Estimates published by United Nations Conference on Trade and Development (UNCTAD) Wednesday said that the slowdown of manufacturing in China due to the coronavirus (COVID-19) outbreak is disrupting world trade and could result in a 50 billion dollar decrease in exports across global value chains.
The most affected sectors include precision instruments, machinery, automotive and communication equipment.
Among the most affected economies are the European Union (USD 15.6 billion), the United States (USD 5.8 billion), Japan (USD 5.2 billion), South Korea (USD 3.8 billion), Taiwan Province of China (USD 2.6 billion) and Vietnam ( USD 2.3 billion).
India is among the 15 most affected economies due to the coronavirus epidemic and slow down in production in China, with a trade impact of 348 million dollars.
The trade impact for India is less as compared to other economies such as EU, the US, Japan and South Korea.
Trade impact for Indonesia is 312 million dollars.
For India, the trade impact is estimated to be the most for the chemicals sector at 129 million dollars, textiles and apparel at 64 million dollars, automotive sector at 34 million dollars, electrical machinery at 12 million dollars, leather products at 13 million dollars, metals and metal products at 27 million dollars and wood products and furniture at 15 million dollars.
Impact on global economy
Besides its worrying effects on human life, the novel strain of coronavirus (COVID-19) has the potential to significantly slowdown not only the Chinese economy but also the global economy. China has become the central manufacturing hub of many global business operations. Any disruption of China’s output is expected to have repercussions elsewhere through regional and global value chains, UNCTAD said.
Over the last month, China has seen a dramatic reduction in its manufacturing Purchasing Manager’s Index (PMI) to 37.5, its lowest reading since 2004.
This drop implies a 2 per cent reduction in output on an annual basis.
This has come as a direct consequence of the spread of corona virus (COVID-19).
The 2 per cent contraction in China’s output has ripple effects through the global economy and thus far has caused an estimated drop of about USD 50 billion across countries,”UNCTAD said.
“The most affected sectors include precision instruments, machinery, automotive and communication equipment, it added.
UNCTAD said because China has become the central manufacturing hub of many global business operations, a slowdown in Chinese production has repercussions for any given country depending on how reliant its industries are on Chinese suppliers.
In addition to grave threats to human life, the coronavirus outbreak carries serious risks for the global economy, UNCTAD Secretary-General Mukhisa Kituyi said.
Any slowdown in manufacturing in one part of the world will have a ripple effect in economic activity across the globe because of regional and global value chains, he said.
Pamela Coke-Hamilton, who heads UNCTAD’s Division on International Trade and Commodities, said for developing economies that are reliant on selling raw materials, the effects could be felt very, very intensely.
Assuming that it is not mitigated in the short-term, it’s likely that the overall impact on the global economy is going to be significant in terms of a negative downturn, she said.
The estimated global effects of COVID-19 are subject to change depending on the containment of the virus and or changes in the sources of supply.
Meanwhile, the extent of the damage to the global economy caused by novel coronavirus COVID-19 moved further into focus as UN economists announced a likely USD 50 billion drop in worldwide manufacturing exports in February alone.
Highlighting the ongoing uncertainty surrounding the economic impact of the epidemic, in which there have been more than 90,000 confirmed cases in more than 70 countries (the majority in China) and over 3,000 deaths, Coke-Hamilton said that US measures in terms of visitor arrivals, cancelling various meetings were having a knock-on effect in terms of demand.
So right now, we’re not clear on where it will go a lot will depend on what happens with COVID-19; if they are able to come up with a vaccine then hallelujah, hopefully it will end very quickly, but if not, the impact can be severe, she said.
Also read: Global economy is gripped by a rare twin shock of supply and demand, thanks to coronavirus
IMF’s relief
In remarks made at a joint press conference with the head of the World Bank Group, the IMF Managing Director, Kristalina Georgieva, said that the UN-backed global funds would make up the shortfall, in effect, by offering to inject around USD 50 billion into low-income and emerging market nations, pending requests for support.
“Thanks to the generosity of our shareholders, we have about USD 1 trillion in overall lending capacity, she said.
“For low-income countries, we have rapid-disbursing emergency financing of up to USD 10 billion (50 per cent of quota of eligible members) that can be accessed without a full-fledged IMF programme, she added.
The IMF chief added that members can access emergency financing through the Rapid Financing Instrument.
“This facility could provide about USD 40 billion for emerging markets that could potentially approach us for financial support. We also have the Catastrophe Containment and Relief Trust the CCRT which provides eligible countries with up-front grants for relief on IMF debt service falling due.
“The CCRT proved to be effective during the 2014 Ebola outbreak, but is now underfunded with just over USD 200 million available against possible needs of over USD 1 billion.”
She called on member countries “to help ensure that this facility is fully re-charged and ready for the current crisis”, and said that the Fund was “fully committed to supporting our member countries, particularly the most vulnerable. We have the tools to help and we are coordinating closely with our partner institutions.
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