Experience has shown us that health outbreaks such as the coronavirus are economic and multilateral issues as much as they are medical concerns. We can already determine, for example, that the virus recently named COVID-19 by the World Health Organization (WHO) will weigh down economic growth, at least in the near-term. Its effects further on are yet to be determined.
The Asia-Pacific Economic Cooperation (APEC) experience with severe acute respiratory syndrome (SARS) 18 years ago tells us that the Asia-Pacific has the wherewithal to cope with such events. The grouping, a collective of 21 economies lining the Pacific which primarily engage each other on economic matters, produced a SARS action plan, to support efforts to deal with the outbreak.
Lessons learnt from that experience led to the establishment of the Health Task Force to help address health-related threats to economies’ trade and security, focusing mainly on emerging infectious diseases.
In 2007, APEC established the Health Working Group (HWG) to have a collective regional preparedness and response to the emergence of health outbreaks, knowing that the impact of SARS, avian influenza, H1N1 and the like falls not only on the health sector but also agriculture, trade, tourism, transportation and business across many borders. The same group met twice this month in Putrajaya, Malaysia, to address COVID-19. It was an opportunity for APEC officials to coordinate with the WHO, which sent representatives, and with key infectious disease experts.
It is easy to draw parallels between SARS and this new strain. But it is still early to quantify the impact of the coronavirus’s spread on global economic growth. The world today is a different arena. China accounts for 21.4 percent of world GDP (in PPP terms, as of end-2018) compared to around 4.5 percent during the SARS outbreak.
The increased interconnectedness of the global economy and the deep integration of international supply chains amplify the impact of the current health shock to an already-fragile global economic recovery. Looking ahead, a deterioration in consumer and investor sentiments could translate into significant economic and financial risks.
There is already an observed decline in travel and tourism. An associated adverse impact on retail and hospitality receipts as well as transport sales are expected to reverberate around the world.
The coronavirus is a prominent downside risk, adding to ongoing uncertainties on the external front, such as trade tensions, Brexit, and environmental catastrophes on both sides of the Pacific.
Authorities must start thinking about the long term to minimize lasting harm to the economy and society alike. During this time of heightened uncertainty, monetary and fiscal authorities could consider maintaining accommodative policies to support economic growth. In the medium to long-term periods, economies could look at structural reforms that ensure immediate action by governments, build stronger healthcare systems, and allocate resources for research and surveillance of infectious diseases.
If past outbreaks have taught us anything it is that the region can bounce back, so long as economies cooperate and put in place the right measures. It is also relatively more prepared.
Many measures have been put in place to contain the outbreak. Efforts in prevention-and-control and monitoring have exceeded WHO requirements. Scientists were able to correctly identify the disease quicker and share information. Authorities in affected economies have been judicious in handling public information and announcements on what the public should (wash hands, monitor health, etc.) and should not do (panic) amid a health scare.
As the host of APEC 2020, Malaysia is taking precautionary measures to minimize the risks of the coronavirus and ensure these necessary meetings between delegates from around the region continue with success while minimizing further spread of the virus.
Health ministers and officials will meet in Penang in August to continue to build on this week’s discussions on COVID-19 and examine regional policy approaches to continue addressing the issue.