The Coronavirus Will Impact These Three Things in a Major WayFebruary 25, 20202 min read
The coronavirus has already sent ripple effects through the global economy, according to Michael Ehrlich, professor of finance at New Jersey Institute of Technology. Reports of Wall Street reacting, automakers scrambling to avoid major disruptions and the Mobile World Congress cancellation has demonstrated the effects of COVID-19.
According to Ehrlich, some of the biggest indirect impacts of the virus will be felt in tourism and travel, supply chain disruption and the flight to quality.
Airlines have begun to cut routes to destinations with high risk, and tourism in major European countries have forecasted a decline, as much as 30-40% in France according to a report in Forbes.
"We're already seeing people decide to not go on cruise ships or not to travel on airplanes because of the coronavirus," said Ehrlich.
Supply chains are being met with challenges due to China's factory shutdowns.
"The real impact of where it's going to affect the economy is supply chain. China is the factory of the world, and those factories are being shut down in order to contain the virus and slow down the transmission of the virus," said Ehrlich.
Finally, the third impact is a phenomenon called flight to quality. This is when investors move capital from risky investments to safer ones, a reaction when there is uncertainty in international markets. The move, according to Ehrlich, can see investors take up more U.S. stocks, bonds, and dollars that are viewed as more stable long term investments.
The downstream effect could lead to a boost in the U.S. economy as it allows national manufacturing sectors to better compete in a marketplace where they are in higher demand.
Michael Ehrlich is an expert on financial markets and institutions, with an emphasis on market failures. He is available to speak to the media – simply click on his icon to arrange an interview.
Michael Ehrlich Associate Professor of Finance and Co-Director of NJ Innovation Acceleration Center
Professor Ehrlich's research focuses on financial markets and institutions, with an emphasis on market failures