Coronavirus: the contaminated global economy

It is not a grain of sand, but a virus which seizes the world machine. The coronavirus has virtually shut down China, the world's true factory. As in the domino theory, the economies of all countries suffer the repercussions of this gigantic engine failure. France is not spared where two new cases were confirmed on Tuesday. It is, said the Directorate General of Health, a young Chinese girl who returned from China on February 7 and a French man just returned from Lombardy. The first is hospitalized in Paris and the second in Auvergne-Rhône-Alpes.

Admittedly, their case does not inspire concern but "during a health crisis of this magnitude, the economic impact can be as significant as during an oil crisis", warns Etienne Sebaux, partner at the consulting firm Kearney . At this stage, Bercy has not yet revised its growth forecasts (expected at 1.3% in 2020), but is already counting on a negative impact of - 0.1 point. For its part, the Banque de France has already announced that it will "revise its forecast slightly downward" (1.1% in 2020).

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Markets unscrew

The financial markets did not wait to unscrew. In the eurozone, prices have tumbled on average by 5% in recent days. How to explain this sudden panic? "Up to now, the patients have been 95% Chinese," observes François Chaulet, the managing director of Montsegur Finance. But today, the virus is approaching us. The volatility indicators, that is to say the feeling of risk that investors feel, have jumped to 25%, while in the last five years they have been close to 14%. "

Investors who fear that containment measures taken by governments in the event of a global pandemic will weigh on consumption. One sign among others of the precautionary principle implemented everywhere: on the Paris-Milan line, the SNCF controllers no longer go to Italy but go down to the border where they are relayed by their Italian colleagues.

With the risks of a fall in consumption, "the second cause for concern, the most worrying, is that of industrial supply chains", recently specified the Minister of Economy, Bruno Le Maire, targeting in particular the sectors of automotive and health. Countless factories in China are still shut down and many container ships are stuck in ports. "Here, on site, all economic activity is frozen," said an official at the French consulate in Wuhan, the epicenter of the health crisis.

Stock-outs expected from mid-March

"There will certainly be stock-outs or delays in deliveries linked to supply in certain sectors," says Etienne Sebaux. The automobile, but also electronics - LCD screens, smartphones, etc. - or consumer goods are hit hard.

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The seven Seb factories in China, including one in Wuhan which employs 1,300 people, have been closed since mid-January at the request of Beijing and for an indefinite period. Since then, nothing has left the Chinese factories of the world leader in small household appliances, whose factories in France are likely to suffer from the lack of supply of components from China. A situation that has brought down Seb's share price, which must make a communication to the financial markets on Thursday.

In other sectors, the situation is less critical because companies still have stocks. Example in textiles where spring-summer collections are already delivered. But between the boat trip - which lasts a month and a half - and the possible assembly work on arrival in Europe, consumer goods should start to run out on the shelves in a few weeks or months. "There could be an effect in stores from the second half of March," confirms Jean-Charles Vogley, general delegate of the Federation of Home Furnishings and Equipment (FNAEM).

To avoid paralyzing maritime traffic, some companies are turning to a freight train - one of the new silk routes - which links the 11,300 km between Lyon and Wuhan in fifteen days with wagons full on board raw materials and semi-finished products.

Relocations in Europe or the Maghreb

“About 30% of everything that occurs in value on the planet is made in China, insists Etienne Sebaux, of Kearney. The coronavirus crisis is an indicator of the weight of the Middle Empire in the world production of semi-finished products. The Minister of Economy, Bruno Le Maire, hit the nail on Tuesday. "The coronavirus is a game changer (NDLR: a game-changing event) in globalization ”.

"Companies and governments are becoming aware of their dependence on China," confirms Etienne Sebaux. We expect, within five years, that companies will take steps to relocate, in Eastern Europe, the Maghreb or Turkey for example. This dynamic has already started following the trade war between China and the United States or the fear of climate threats. But it is clear that the coronavirus health crisis will be an accelerator. From now on, the competitiveness-price consideration will be modified by the competitiveness-risk consideration. "

In the end, is it serious, doctor, for our economy? For the moment, the symptoms are still mild. But it will all depend on the duration of the infection. On the market side, we hope very soon for "reassuring" signals. "If the World Health Organization assured that the peak has passed, if companies credibly communicated the real impact of the crisis on their balance sheets or if central banks organized to cope, it could calm down, finally , the panic. "