The coronavirus rages. Over the weekend, the number of victims exceeded 100,000 for the first time and the number of countries hit reached 110. The virus causes the disease called COVID-19 – coronavirus infectious disease 2019. At this writing, COVID infected 126,293 and killed 4,633.
Italy became the first country in the world to impose a nationwide lockdown, a measure China had previously tried only by province, in Hubei, the origin of the coronavirus. The lockdown effectively restricted the movement of 60 million in Italy where COVID-19 had infected more than 12,462 people and killed at least 827 —the worst in Europe, and second only to China’s over 80,982 infected and over 3,071 dead.
In the US, President Trump on Thursday banned all flights from mainland Europe (Schengen zone) for 30 days. The ban does not apply to US citizens and permanent residents. US virus cases have risen to 1,311 (8th in the world) with deaths at 30 (7th in the world).
In the Philippines, COVID-19 has infected 49, with three critical, and two dead. President Duterte stopped classes in the national capital for four days till March 15, to slow/stop the spread of coronavirus.
On Monday, March 9, for the first time, the World Health Organization used “pandemic” to describe the situation. “Now that the virus has a foothold in so many countries, the threat of a pandemic has become very real,” declared Tedros Adhanom, the WHO director general. “But it would be the first pandemic in history that could be controlled,” he assured.
Specter of recession
The global health crisis has turned into a global economic crisis, raising the specter of recession in Asia, Europe, and the United States, the Philippines’ major export markets and sources of investments. For the first time in 11 years, talk of US recession is no longer speculation.
Still, on Tuesday, March 10, as far as the economy was concerned, Finance Secretary Carlos Dominguez said, the spread of COVID-19 in and out of China was “not a worrisome situation—we’re not teetering on anything.” He described as “still very comfortable” the fiscal and monetary situation and the government has “a lot of tools in our toolkit” to cope with the crisis.
The Economic Development Cluster has approved an additional P2.92 billion for COVID-19 response, for purchases of additional testing kits and protective care for health workers and equipment, and for contact tracing and surveillance.
If the epidemic lasts till June, the National Economic and Development Authority had projected tourism-related job losses at between 30,000 and 60,000. In the 2008-2009 global financial meltdown, the Philippines suffered 90,000 job losses.
Work stoppage?
For his part, Albay Congressman Joey Salceda suggested a temporary work stoppage, especially in Metro Manila. Anyway, whatever losses are incurred, based on previous outbreaks SARS and MERCS, “the country easily recovered its losses.”
Airlines have seen their passenger volume collapse from 100% to zero. One British regional airline, Flybe declared bankruptcy on March 4. It handled more than half of domestic flights outside London and flew nine million passengers a year to 170 destinations.
Airline losses
On March 6, when the virus had infected 94,000 and killed almost 3,000, the International Air Transport Association had estimated global airlines could lose $113 billion, up from $30 billion earlier estimate in February, and lose 19% of their business if coronavirus continues to spread. Asia Pacific carriers could lose $58 billion in revenues.
Stock markets collapse
On Monday, March 9, New York’s Dow Jones stocks lost 7.8% of their value. The S&P 500 crashed nearly 8%—its worst drop in 10 years, decimating more than $5 trillion of listed wealth.
With the S&P already losing 20% from its high point last week, stocks are in bear territory for the first time in 11 years. The share price crashes amounted to a global carnage, the worst panic selling since 2008.
“The Dow Jones Industrial Average sank by 7.8% or more than 2,000 points – the biggest points-drop in history and the largest decline in percentage terms since the financial crisis. The S&P 500 fell 7.6%, while the Nasdaq dropped about 7.3%. The declines in London wiped some £125 billion off the value of major UK firms,” according to BBC.
As the saying on Wall Street goes, nobody wants to catch a falling knife. What makes falling share prices worrisome is that stock purchases are seldom financed with cash 100%. About 80 to 90% of them are funded with borrowed money paid with interest that is now higher than the expected yield from a share price appreciation or dividend. The banks that lent money for share purchases are now under pressure to demand payments from their borrowers, because the collateral value of the shares has declined considerably.
90% chance of recession
The Washington Post reported on March 9: “J.P. Morgan sent around a note to clients late last week saying markets were indicating a 90% chance of a recession, a term that generally means six straight months of economic contraction. The picture looks worse now, especially in the bond market. Last week, Wall Street panicked when the yield on a marquee government bond — the U.S. 10-year Treasury — fell below 1%. That had never happened before. Now that yield is below 0.5%, a jaw-dropping situation that didn’t even occur during the Great Recession.”
Wrote Luis Limlingan of Regina Capital: “The Dow Jones Industrial Average tanked 2,013 points, or 7.79%, on pace for its worst day since December 2008. The S&P 500 plunged 7.6% and The Nasdaq Composite Index was off 624 points, or 7.29%, at 7,950. A circuit breaker triggered by a 7% drop resulted in market wide halt of trading for 15 minutes until reopening at 9:49 a.m. ET.”
On Monday, Philippine stocks lost more than 6.76% of their value, equivalent to P663 billion worth of wealth. It brought total market cap down to P11.5 trillion and is the steepest decline since October 2008. Monday’s close of 6312 points is the lowest under the Duterte presidency. Listed shares have already lost 19% of their value since 2019’s last trading day.
“The worsening health crisis worldwide and its consequences to the global economy are enough reasons for investors to dump their shares today. A clearer government continuity program could ease the nerves of investors,” said Astro del Castillo, managing director of First Grade Investments.
By Tuesday, US stocks bounced back. But Limlingan noted “the intra-day session was volatile as investors weighed the prospects of fiscal stimulus to curb slower economic growth stemming from the coronavirus outbreak, reclaiming a chunk of the ground lose the previous session in the markets biggest one-day percentage drop since 2008. European stocks ended a volatile session lower, erasing a rebound that at one point was the biggest gain in nearly four years. The European Stoxx 600 closed down 0.88%. The majority of sectors ended in the red, although basic resources was up around 1.3%. The move comes as doubts emerged about the timing and makeup of U.S. stimulus measures. Attention remains firmly on Italy where the government extended its quarantine measures to the entire country.”
On Wednesday, March 11, the Dow opened down over 700 points or 2.9%. The S&P dropped 2.6% while Nasdaq Composite fell 2.5%.
Asian stocks also tumbled. Most are in bear territory, with outlook uncertain.
Oil prices fall 30%
Also on March 9, oil prices fell 30% – the sharpest fall since the January 1991 Gulf War as Saudi Arabia launched a price war against Russia. The price war threatens to push oil to $20 per barrel. That would be a drop of 67% from the December 2019 average of $61.30 a barrel.
As of this writing, the benchmark West Texas Intermediate crude is $31.69 per barrel, down 48% from December’s $61.30. In June 2008, crude hovered at $145 a barrel.
Wrote Heather Long of the Washington
Post: “The world economy essentially just got a one-two punch to the face.
The coronavirus is a serious health crisis that’s morphing into an economic
crisis as people stay home, cancel trips and stop spending on about everything
except hand sanitizer and toilet paper. On top of that, Saudi Arabia
basically launched an oil price war on Sunday. The world has a glut of oil
right now and the Saudis decided not to scale back production after Russia
flooded the market with extra oil. So oil prices plunged 30% Sunday, the
largest one-time drop since the 1991 Gulf War. Oil is now trading around $30 a
barrel, a price most energy companies outside Saudi Arabia can’t survive on,
including many in the United States.”
Good for most Filipinos
A sharp oil price drop should cheer up our more than 500,000 jeepney drivers, our two million fishermen, and our three million farmers who use diesel for their work, and of course, our 10 million motorists. It also means much lower cost of electricity for most Filipino households and industries, thereby bringing down the cost of goods and services. Fuel easily accounts for 20% of a household’s expenses. The same ratio applies to industries.
Bad for OFWs
However, sharply lower crude prices would be bad news for our 2.2 million OFWs who are working in oil exporting countries Saudi Arabia (No. 1 oil exporter), UAE (No. 5), Kuwait (No. 6), and Qatar (No. 9). The four account for $5.2 billion in remittances or 17% of the $30 billion total remittances to the Philippines.
On balance, it is better to have lower, than higher, oil prices.
Early, decisive action needed
Meanwhile, “with decisive, early action, we can slow down the virus and prevent infections. Among those who are infected, most will recover,” WHO chief Tedros said on March 9. ‘Of the 80,000 reported cases in China, more than 70% have recovered and been discharged.” WHO classifies infection into four categories – no cases, sporadic cases, clusters, and community transmission. For the first three categories, countries must focus on finding, testing, treating and isolating individual cases, and following their contacts.
According to Tedros, in areas with community spread, testing every suspected case and tracing their contacts becomes more challenging.
Action must be taken to prevent transmission at the community level to reduce the epidemic to manageable clusters.
Depending on their context, countries with community transmission could consider closing schools, cancelling mass gatherings and other measures to reduce exposure.
The fundamental elements of the response are the same for all countries:
Emergency response mechanisms; Risk communications and public engagement; Case finding and contact tracing; Public health measures such as hand hygiene, respiratory etiquette and social distancing; Laboratory testing; Treating patients and hospital readiness; Infection prevention and control; And an all-of-society, all-of-government approach.
Symptoms appear in first five days
According to Johns Hopkins CSSE, the first reported COVID-19 infected individuals, some of whom showed symptoms as early as Dec. 8, were discovered to be among stallholders from the Wuhan South China Seafood Market.
Subsequently, the wet market was closed on Jan 1.
The virus causing the outbreak was quickly determined to be a novel coronavirus.
On Dec. 31, 2019, WHO was informed of an outbreak of “pneumonia of unknown cause” detected in Wuhan City, Hubei Province, China – the seventh-largest city in China with 11 million residents.
By Jan. 23, 2020, there were over 800 cases of 2019-nCoV confirmed globally, including cases in at least 20 regions in China and nine countries/territories.
On Jan. 10, gene sequencing further determined it to be the new Wuhan coronavirus, namely 2019-nCoV, a betacoronavirus, related to the Middle Eastern Respiratory Syndrome virus (MERS-CoV) and the Severe Acute Respiratory Syndrome virus (SARSCoV).