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5 sectors of the global economy affected by coronavirus

UNITED STATES (OBSERVATORY NEWS) — An outbreak of coronavirus already has a negative impact on the global economy, and experts predict that a negative effect will have a lasting effect.

A variety of industries are suffering from the epidemic – from automobile manufacturing to tourism. Stock markets are also responding to the epidemic in China, as the economy of this country is one sixth of the global economy and has a significant impact on almost all industries.

Below we will talk about the main sectors of the global economy affected by the coronavirus.

Supply chain

Many companies were forced to suspend production at Chinese enterprises due to entry restrictions imposed by China in connection with the outbreak of the virus.

In particular, Airbus suspended production in Tianjin. An enterprise in this city produces about six A320s per month, so a shutdown can have a significant negative impact on the company’s performance.

There are other companies that were forced to take similar measures, among them Toyota, General Motors and Volkswagen.

The effect of coronavirus is not only related to China. South Korean automaker Hyundai has also suspended production lines due to interruptions in the supply of spare parts between South Korea and China.

Another major automaker, Honda, has three factories in Wuhan, China, a coronavirus distribution center.

Tourism

In recent years, the number of Chinese tourists traveling around the world has increased dramatically. And if in 2000 the number of Chinese tourists was only 10.5 million, then in 2018 it reached 150 million people. This suggests that tourism is one of the industries that has been hit hardest by the outbreak of coronavirus.

Coronavirus negatively affected the directions coming to China, primarily Japan, where Chinese tourists make up 40% of all visitors to the country and spend the most money.

Now, many cruise liners from China are not allowed in the ports of the country until passengers pass the virus check.

Royal Caribbean withdrew eight trips to China. The company does not allow all passengers who have been in China or Hong Kong in the past 15 days to its vessels. Such restrictions can cost the company $ 50 million.

Thailand’s tourism sector is also at risk. The country’s economy is in a difficult situation, and Chinese tourists give the country’s economy up to 4% of GDP.

Other popular tourist destinations such as Bali are also negatively impacted. Indonesia Travel Agents Association said 10,000 Chinese tourists canceled a trip to Bali in just one day.

In parallel with this, airlines are also suffering, which also note a decrease in passenger traffic. In addition, airlines have to cancel flights to and from China. So, Cathay Pacific has reduced the number of flights to China by 90%. The airline asked 27,000 employees to take unpaid leave for three weeks so that the company could cope with the crisis.

Another industry related to tourism is hotels. They also suffer losses, as tourists cancel their trips, therefore, hotel reservations are canceled.

Beauty industry

UBS Bank experts note that the beauty industry may be in danger of a serious crisis due to an outbreak of coronavirus.

The fact is that this sector is highly dependent on retail customers. And this in turn means that the Chinese market accounts for a significant share of business, since Chinese consumers are among the most active in the world.

UBS analysts believe that Estée Lauder is particularly vulnerable to the situation around the coronavirus, as China accounts for half of the company’s revenue in the Asia-Pacific region.

Luxury clothing

The luxury brand Burberry, as well as other brands in this category, note that their business in China is in a very difficult position, which could worsen significantly if the coronavirus continues to spread.

Media previously reported that 24 out of 64 Burberry stores in mainland China were temporarily closed due to a virus outbreak.

UBS analysts also note the negative impact of the virus on all luxury products.

Alcoholic drinks

Another sector that feels the negative impact of the epidemic is the alcohol sector.

UBS analysts note that brands such as Brown-Forman, Diageo, Pernod Ricard and Rémy Martin are considered the most vulnerable.

In their review, they note that due to the reduction in the number of international travels, it is worth observing a reduction in the number of purchases in Asia Duty Free, which will negatively affect the sales of these brands. Among other things, the protests in Hong Kong also have a negative effect, experts say.

Moody’s analysts also believe that the spread of the disease will have a negative effect on the consumption of European alcoholic beverages in China, while China is one of the largest markets for these brands.

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This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.

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