As the coronavirus crisis spreads and deepens, the threat to the supply chains of economies in the EU is beginning to worry the leaders of industry. There is still no indication that the epidemic is under control. Reports just out of neighbouring Italy show that this is far from the case.
Several towns in Lombardy have gone into lockdown after multiple cases of infection were identified. Although the spread outside China is still relatively contained, interconnectedness means world economies will be affected for months to come.
Ironically, stock markets do not seem unduly worried. Share prices are hovering close to record highs as investors believe that central banks will pump more liquidity into economies to fix any significant dip in share prices. But there is no doubt that the virus is beginning to put the brakes on world economies and Malta will not be immune to the collateral effect of this downturn.
Tourism is likely to be the most hard-hit industry as millions of Chinese tourists who travel to Europe every year will now think twice before leaving the country, afraid that the irrational fear of people in the countries they visit could turn into discrimination.
Likewise, many Europeans are giving up on any planned travelling to China and the Far East fearing some possible undefined effects of the epidemic even after it is controlled. Major cruise line operators have already sounded the alarm bells about a downturn in their business.
Many European manufacturing industries depend on the importation of various items from China for their production. The disruption of the supply chain of these businesses could not only lead to a slowdown in output but also the temporary laying off of workers until production returns to normal. The effect of globalisation has meant that Western economies now depend on a plethora of products manufactured in China, from mobile phones to clothing, from medical equipment to foodstuffs.
Economists, rather stoically, are revising downwards their growth forecasts for China and the EU. But they do not seem too worried about the massive human and economic impact that this epidemic – forecast by some to be on the verge of a pandemic – will have on the supply of critically essential products for the months to come.
Should the coronavirus evolve into a global pandemic, panic may set in as it has already done is some small communities where people have tested positive for the virus. Those travelling on cruise ships on which some passengers were carrying the virus know what isolation and quarantine feel like when health authorities adopt a zero-tolerance policy in trying to limit the spread of the disease.
If the coronavirus epidemic continues to spread at a fast rate, even if the mortality rate is not alarming, mass panic cannot be excluded. If, as we have reported, people irrationally give up on going to Chinese restaurants for fear of contracting the virus, one can imagine how mass hysteria can erupt if the epidemic spreads.
Health authorities must continue to inform the public objectively on the health aspects of the epidemic to avoid futile incidents of panic.
It is equally important that business leaders do whatever it takes to ensure that critically essential goods that originate from China and whose production is being impacted by the virus are sourced from other countries until the coronavirus epidemic is controlled.
Fear is the economy’s worst enemy. It may not be easy to prevent it from getting the better of this one. Clear information and calm action will be crucial factors to avoid disruption going forward.