The coronavirus has put the world’s economy in survival mode

The notion of this outbreak being a short-lived negative shock to global demand now looks unrealistic. It is not just spending on restaurants and travel that is suffering, but also investment by businesses while they wait for the uncertainty to be resolved. This will have long-term effects on growth even if the outbreak proves short-lived…

The disruption of supply chains, especially those that pass through Asia, is hurting businesses in multiple dimensions. Countries such as China, South Korea and Japan are critical to the supply chains for products ranging from plastic toys to iPhones to high-tech machinery. In these countries, manufacturers can’t get raw materials delivered reliably, are facing worker shortages and are having difficulty shipping out products. Rejiggering supply chains takes months, if not years. If the coronavirus spreads and causes disruptions to other major economies, it could wreak further havoc on supply chains.

Still, big companies are better equipped to cope in difficult times. They tend to have large cushions of cash and can get financing from banks. The picture is bleaker for small companies.