Coronavirus cases in China overtake SARS — and the economic impact could be ‘more severe’

The number of coronavirus cases in China has already surpassed that of SARS, and the economic impact of the new virus from Wuhan could be more severe than the 2002-2003 epidemic, or at least similar, according to economists.

It took more than 6 months for the number of SARS cases to surpass 5,000 in mainland China. China had 5,327 SARS cases between Nov. 1 2002 and July 31 2003, according to the World Health Organization.

On the other hand, it’s taken about a month for the number of new coronavirus cases to climb past 5,000 on Tuesday. The new virus was first officially reported in the Chinese city of Wuhan on Dec. 31.

According to China’s National Health Commission, the number of cases in mainland China stood at 5,974 at the end of Tuesday, up from 4,515 the prior day.

Initial figures from the government indicate a death rate of between 2% and 3% in China for the new virus, compared to a mortality rate of about 7% for SARS.

The Wuhan coronavirus, which could lead to a type of pneumonia, has sparked alarm as it comes from the same family of viruses as SARS which killed some 800 people. The latest outbreak has killed 132 in China as of Wednesday’s update.

“There are reasons to worry about this time around compared to SARS because first of all, the connectivity in terms of transportation and economy is much greater nowadays (as compared) to the SARS episode,” Tommy Wu, senior economist at Oxford Economics, told CNBC on Wednesday.

The disease has spread beyond Wuhan to Beijing, Shanghai and other highly populated cities in the country. Cases in other parts of Asia such as Thailand, Japan, Singapore and South Korea, have also been reported. In Europe, cases have been reported in France and Germany, and the United States currently has 5 confirmed cases.

“We believe the economic impact of the coronavirus could be bigger in comparison to SARS in 2003,” wrote analysts from Nomura in a Wednesday report.

China’s real GDP growth plunged by 2 percentage points (pp) from the first quarter to the second quarter of 2003 due to the SARS outbreak, Nomura analysts noted. “Based on our assumptions, real GDP growth in Q1 2020 could materially drop from the 6.0% pace achieved in Q4 2019, on a scale perhaps bigger then 2pp registered during the SARS outbreak in 2003.”

However, the analysts pointed out that “the coronavirus may prove to be only a temporary shock (both on the demand and supply sides) and may not necessarily leave a long-lasting impact.”

Still, “the scale of the current slowdown and timing of the recovery are mainly determined by the unfolding coronavirus, which remains uncertain,” Nomura said.

Oxford’s Wu also flagged the timing of the outbreak, which took place just before the Lunar New Year holiday, when hundreds of millions of Chinese traveled domestically and internationally to be with their families during the festivities.

“The timing is also important because this time around is during Chinese New Year, where there are mass movements of citizens around the country going back home for family reunion. And during the next couple weeks, there’ll be a massive flow coming back from home to the cities they work,” Wu said. “That’s why it’s possible that this time around the impact could be more severe than during the SARS episode.”

“Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, the economic impact now looks likely to be of at least a similar scale,” wrote Mark Williams, chief Asia economist at Capital Economics in a note on Monday.

According to an estimate by Capital Economics, SARS lowered China’s growth by three percentage points in its worst-affected quarter. Overall, growth slowed from 8% year-on-year to 5% during that outbreak.

“The very limited data available so far suggest that the current impact is not yet that severe but it could end up being similar,” Williams said. “But it is now certain that the outbreak will have a significant impact on China’s GDP this quarter.”

He cited the slowdown in activity within China. Beyond the Lunar New Year holiday, Shanghai has told businesses to remain shut for an additional week, while travel restrictions are in place in around 20 cities. Many long-distance bus and high-speed rail services have also been halted.

“On top of these … steps, many businesses such as restaurants have chosen to close and people are avoiding crowded places,” Williams said.

He flagged that rail passenger numbers on Saturday — the first day of the Lunar New Year — was 42% lower compared to the equivalent 2019 period, while road passenger traffic decreased by 25%.

In May 2003 — the peak month of the SARS outbreak — year-on-year declines were 57% for rail passenger traffic and 45% for road passenger traffic, Williams said.

“While the more open and proactive official response this time may prove more effective in containing the virus, it could also make the initial economic disruption larger,” he pointed out.