PANDEMIC MONITOR: 27 February 2020
Over the past seven days, concerns about a global pandemic have increased significantly, with authorities across the world implementing further restrictions on movement, international travel, and global logistics. As the outbreak has spread at an unexpectedly rapid pace in Iran and Italy, global markets have been ‘corrected’ and fears of a longer-term downturn are now more extensive.
Since 20 February, the outbreak of the novel coronavirus (COVID-19) moved closer to pandemic status. As of 27 February, the total number of COVID-19 cases worldwide reached 82,166, with 2,800 fatalities. Of this total around 78,500 cases, or around 95 per cent of the total, and all except 56 deaths occurred in China.
By some definitions COVID-19 has already reached pandemic status. In the strictest sense, a pandemic is defined as an outbreak that spreads across continents. Although the World Health Organization (WHO) issued a statement on 21 February saying the opportunity to prevent this scenario was narrowing, the UN agency has yet to declare COVID-19 a pandemic. But it is clear that even by the WHO’s own definition of a pandemic in six phases, we are edging closer to the sixth, and final phase. However, when the WHO declared a pandemic for the H1N1, more than 70 countries had been affected; 33 countries have been affected by this current viral outbreak as of 25 February, excluding China.
- WHO defines a pandemic as: community level outbreaks in at least one other country in a different WHO region in addition to the criteria defined in Phase 5
The warning came as outbreaks were confirmed in Iran, Italy, and South Korea, in parallel to continued slowing growth of new daily cases in China. Nevertheless, China remains the worst-affected country with 77,780 cases, according to the WHO’s Situation Report on the outbreak on 25 February, while the rest of the world had 2,459 recorded infections.
Authorities and public opinion across the globe are now increasingly concerned about the rapid pace at which COVID-19 has spread in some clusters outside of China but that lack an explicit link to the mainland. In fact, fewer infections are due to direct links to China. Instead, many of them have been transmitted in the reporting country or through a country other than China. France saw its first fatality in a patient who had contracted the virus in-country. Authorities across the region are now on high alert. The Public Health Agency of Sweden announced on 26 February that it had raised its level of preparedness to its second-highest level on a five-tier scale.
While the aforementioned countries are among the worst-affected, the virus is penetrating previously unaffected countries. In Europe, these include Austria, Croatia, Greece, Switzerland, and mainland Spain. In the Middle East and North Africa, Algeria saw its first confirmed infection on 25 February, following Bahrain and Kuwait a few days earlier. Latin America also saw its first infection case in a person who had travelled from Italy to the industrial hub São Paulo on 26 February.
To date, Sub-Saharan Africa is the only region that has no confirmed cases. But authorities remain very concerned, with the West African Centre for Disease Control estimating the capital needs to contain the virus at USD50 million, at least. This comes against the backdrop of a new study which will appear in the March edition of The Lancet Global Health journal, which compares the burden of infectious diseases, such as malaria or Ebola, in Francophone and Anglophone African countries. It posits that Francophone countries are less well-equipped than their English-speaking peers in the region, in part due to language barriers (English being the lingua franca of science) and under-funding which is due to poor governance but also lack of access to science funding due to cultural and linguistic bias. The study adds to a growing body of work that highlights the vulnerability of the region to combat COVID-19. Other externalities also affect resilience in Sub-Saharan Africa, including insecurity, ongoing outbreaks of other infectious diseases, like Ebola in eastern DR Congo, and porous borders throughout most of the continent.
Iran’s delayed efforts to suspend travel in and out of the country have significantly heightened the risks for the international dissemination of COVID-19. A report published by MedRXiv on 25 February indicated that it is likely the virus has been active in Iran since mid-January with many cases missed or overlooked due to a poor public health infrastructure and failure to impose quarantine measures. The destinations with the highest number of commercial flights coming from Iran prior to travel suspensions were identified as Dubai in United Arab Emirates, Njaf in Iraq and Istanbul in Turkey. Contamination risk across these areas is subsequently high; there is an elevated vulnerability to infectious disease outbreaks as well as limited ability to detect cases in countries such as Iraq. On 27 February, the sixth case of COVID-19 was confirmed in a male subject in Baghdad, Iraq who had recently returned from Iran.
CASE STUDY - THE IMPACT OF THE CORONAVRUS IN EUROPE
Coronavirus outbreak in Europe challenges freedom of movement
As of 26 February, 12 people have died from COVID-19 in Italy and there have been more than 300 confirmed cases. Travel restrictions are affecting around 100,000 people across northern Italy, particularly in the hardest-hit Lombardy and Veneto regions. Roadblocks were established in around 10 towns in Lombardy, preventing people from entering or leaving, while long queues were reported at supermarkets in many of the affected towns. New cases were also reported in the Emilia-Romagna, Lazio, and Piedmont regions, while on 25 February, authorities confirmed the first case in southern Italy relating to a woman who had tested positive in Sicily. The source of the outbreak in Italy has not yet been determined.
Public pressure on neighbouring countries to shut their borders with Italy will continue to grow
The large number of confirmed cases means that Italy now has the largest COVID-19 cluster outside of Asia. Given their proximity to border areas near Austria and France, this raises the risk of disruption at crossings. While the French government said on 24 February that there was no need to close the border with Italy, the discovery of new cases in the region, particularly in areas nearer to the border, will likely prompt authorities to re-evaluate their initial decision. There are no passport controls between states that are members of the Schengen Area, however countries can reintroduce border controls in ‘exceptional circumstances’; some exercised this right at the peak of the 2015 European migrant crisis.
On 23 February, Austria lifted a temporary ban on trains travelling to and from Italy via the Brenner Pass, which was imposed after two potential cases of coronavirus (COVID-19) were discovered aboard a train destined to southern Germany. The two passengers later tested negative for the virus. Following this, Austria confirmed the first two cases of coronavirus in Tyrol province, with one infection involving a patient from Lombardy, Italy, on 25 February.
Meanwhile, France’s national rail operator has said that Paris-Milan trains will stop at Modane, a commune on France’s side of the border, to change crew as part of a measure to curb the virus’ spread. Moreover, a bus carrying passengers arriving in France’s south-eastern city of Lyon from Milan was stopped due to a suspected case of COVID-19 among those on board. This was later declared negative.
Outbreak threatens local businesses in industrialised regions
The economic impact of a prolonged outbreak in those regions will be especially acute as they are among the country’s most industrialised areas. For example, US-Italian carmaker Fiat Chrysler Automobiles operates multiple production sites across Italy, including eight in Piedmont and two in the Emilia-Romagna region. Ongoing restrictions mean that workers may be unable to travel to workplaces and remain during normal working hours. Some companies will probably seek to mitigate the risk of any long-term disruption in case infected workers spread the virus at commercial sites by partly halting production or working with a reduced workforce.
An extension of roadblocks beyond the currently affected area also means that the transport of parts to different sites would be disrupted. Such a measure will likely be triggered by a surge in the number of confirmed cases in major urban centres, including Milan and Turin.
Beyond the operational implications, commercial disruption is also clear in the financial services sector. Several investment banks, including Citigroup Inc, Credit Suisse, Deutsche Bank, and Nomura have reportedly advised staff against non-essential travel to northern Italy. More companies are likely to follow suit.
The protracted disruption to supply chains in China and the outbreaks in Iran and Italy is having a mounting impact on business operations across different sectors and countries.
- UK-based alcoholic beverages company Diageo on 26 February warned that the outbreak would hit profit margins, and that sales could be as much as GBP325 million below expectations. In large part, this is due to reduced demand for its Johnnie Walker whiskey brand being very popular in South-East Asian and Chinese markets. Travel restrictions have hit sales at restaurants and hotels.
- Although some manufacturing operations in China are resuming, a number of economists estimate that their operations will not reach full capacity until mid-March at the earliest, while more sceptical forecasts predict that operations will only normalise in May.
- The protracted disruption in China, as well as in neighbouring South-East Asian countries is now beginning to seriously affect retailers in Europe. While reporting in Bloomberg news agency suggested a shortage of video console Nintendo Switch could become a reality by mid-April, retailers in the UK are reporting that the product has been in low supply since Christmas. Some stores have displayed empty boxes on their shelves.
- On 21 February, media reports claimed that the number of containers originating from China were now clogging up Indian ports, including Jawaharlal Nehru Port Trust (JNPT), Chennai, Mundra, Visakhapatnam and Vallarpadam. In large part due to a lack of documentation declaring the contents of the containers. That shortage was caused by a lack of staff at Chinese ports, due to the shutdowns in mainland China.
- Although the supply of face masks in China has been nearly fully restored according to Chinese authorities, customs and security officials say they have seized over 31 million counterfeit or sub-standard facemasks, often sold at above-market prices. Although health officials have already questioned the effectiveness of wearing such masks to protect against COVID-19 infection, similar trends are likely to manifest in other countries, particularly if the outbreak keeps spreading to more countries in the two-week outlook. Pharmacies and dental practitioners in the UK have already reported that supply of facemasks for their staff was running low.
- Weimob Inc., the largest cloud-based marketing provider on Tencent’s payment and social media platform WeChat, on 23 February announced that its business system database had been deleted by one of its staff members. The company’s system has now been partially offline for several days, with operations being fully suspended for the first 36 hours after the incident. While new users are unaffected, the firm said it expects old users to regain access to their data once it is recovered by 28 February. Chinese netizens speculate that the attack may have been motivated by lowered company morale following a recent wave of layoffs at the firm, likely due to protracted COVID-19 containment measures that have severely dented business performance.
- Relatedly, Iran is facing a double setback: US sanctions and the Financial Action Task Force’s decision to again list Iran as a High Risk Jurisdiction Subject to a Call for Action, urging the government to ratify two international conventions, in line with the anti-money-laundering organisation’s standards. This has further increased the compliance demands, including enhanced due diligence and know-your-customer controls, on companies doing business with commercial entities in Iran. In turn, this has limited the supply of masks and test kits used to screen for the coronavirus.
- While no major drugmaker in Western advanced economies, such as the US, UK, or the EU have reported shortages of medicines, several of them are sounding the alarm over looming supply constraints. For instance, the US relies heavily on electronic medical equipment and drugs for animals, much of which is supplied by companies in China. Against the backdrop of potential shortages, the US Federal Drugs Administration (FDA) has identified about 20 medicines whose supply is at risk of being disrupted by a protracted pandemic. Between 2010 and 2019, companies in China making those drugs more than doubled their market share to 18 per cent, compared to the EU’s 26 per cent. Furthermore, about 85 per cent of medicines in the US use some component that is produced in China, according to Axios, the US-based news site. While pharmaceutical companies and medicines agencies in Europe have not indicated a risk of shortages of patented medicines, they have warned about scarcity of generic drugs. Much of this is made outside the EU and the US, and authorities have also warned of impurities in medicines, which could be caused by the travel restrictions in China, impeding quality-control checks. Similar impediments have been reported by the FDA.