How is novel coronavirus impacting on the economy?

More and more people across the world are coming down with the new coronavirus.  The outbreak of the disease is also set to have big ramifications for the world, Belgian and Flemish economies.

Robert Boute, professor of supply chain management at the Vlerick Business School, believes that many sectors will feel the impact.  At first only the electronics sector seemed to feel the ramifications, but now online store Coolblue has reported sourcing problems.

“There are many, many businesses in different sectors that receive supplies from China”.

Prof Boute believes that we will gradually notice more and more companies being affected and not always businesses that we expect.

“Companies no longer have a clear view over the supply chain and are not always aware which items are sourced in China.”

The Belgian economy is an open economy and extremely dependant on other countries like China.  Recent figures show Belgian imports from China twice the size of exports. In 2018 Belgium imported 15.1 billion euros of raw materials from China.

Textiles, chemicals, machinery, metals including copper, zinc and nickel are all imported from China. Alternatives are not immediately available.

The Belgian economy ministry has a special team monitoring events. So far few businesses have reported shortages, but it is clear they are aware of the issue. A survey conducted by the chemical industry federation ten days ago reported few problems getting shipments from China, but that could change: the longer the crisis, the greater the impact. Problems in the car assembly industry will also impact on the chemical industry.

Most imports pass via the ports. The Flemish ports of Antwerp and Zeebrugge have already warned they anticipate a major downturn on their trade as a result of the outbreak.  Antwerp is forecasting a 7% drop in container traffic to and from China.  The impact will be far greater than during earlier coronavirus outbreaks like SARS in 2002 when the Chinese economy was a quarter of its present size.

Airports too are feeling an impact.  Fewer passengers are flying out to China.  Some airlines have cancelled flights. Air freight too is being hit. Train services are affected with the service supplying Volvo Cars in Ghent from China taken out of service.  However, transport companies like H.Essers are now using rail to transport pharmaceuticals to China as air transport capacity is limited.

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