Going viral
|The novel coronavirus outbreak has stolen the show over the past week. New Zealand has announced that it will deny entry to all foreigners travelling from China. The ban is currently in force for two weeks, but we can only really see two possible outcomes – either the travel ban lasts much longer, or the coronavirus arrives in New Zealand and the authorities give up on ideas of quarantine. China accounts for 12% of visitor arrivals and is the largest source of overseas students, so this is going to take a serious toll.
Forestry is also heavily affected. 80% of New Zealand forestry exports go to China. As manufacturing in China has slowed due to the virus, log shipments out of New Zealand have suddenly been cancelled. Log exports out of New Zealand have ground to a standstill. Soon logs will start piling up on New Zealand wharves, and the next step will be a sudden reduction in harvesting activity with consequences for employment.
For many other export products we are seeing sudden declines in price as Chinese demand dries up. Crayfish prices have dropped by a third and last week's dairy auction saw prices drop 6%.
The economic impact of the coronavirus is wildly uncertain, but it is now obvious that we are looking at something more severe than SARS. China is much more important to the New Zealand economy than it was in 2003, and the efforts to limit coronavirus via quarantine have been more draconian.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.