A top research firm lays out a bleak coronavirus scenario that would cause global growth to slow significantly in 2020

• A prolonged use of strict coronavirus confinement policies in China could slow global growth by 0.4 percentage points in 2020, according to IHS Markit economists.
• The research firm's base case hinges on the lifting of confinement measures in February, keeping the hit to annual global growth to a modest 0.1 percentage point.
• A more "severe" situation would see containment methods remain in place through the end of February and hit China's annual growth by 1.5 percentage points.
• The team added that, while China was faster to curb contagion than during 2003's SARS outbreak, the country is now a greater portion of global GDP and supply chains are more interconnected than ever before.
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IHS Markit has a dire new GDP projection for a worse-than-expected conclusion to the coronavirus outbreak.

Economists continue to lower their expectations for global growth as the epidemic cuts into demand in China and cripples supply chains around the world. The Chinese government ordered factory closures and weeks-long quarantines to curb further spreading of the deadly virus. Uncertainty around the outbreak's future has the financial sector scrambling to quantify its long-term economic effects.

IHS's base case calls for the confinement measures to be reversed throughout February and modestly slow global gross-domestic-product growth by 0.1 percentage point in 2020, to 2.5% from 2.6%. China would face the brunt of the slowdown with a 0.4 percentage-point hit to growth.

The firm also detailed a more "severe" case that includes containment measures staying in place through the end of February. The prolonged closure of retail locations, factories, and offices would dent China GDP growth by 1.5 percentage points in 2020, IHS wrote. Global growth would slow by 0.8 percentage points in the first quarter of the year and 0.5 percentage points in the second quarter.

The full-year reduction to GDP growth would reach 0.4 percentage points, according to the firm.

IHS's economists indicate that, during the SARS epidemic of 2003, China's economy accounted for just 4.3% of global GDP. The nation now serves as the world's second-largest economy and makes up 16.5% of world GDP, setting up the coronavirus epidemic to hit global growth harder than SARS. The increasingly complex relationships among global firms are also contributing to the economic slowdown, IHS said.

"Mainland China's economy is not only much bigger than in 2003, but it is much more globally interconnected through supply chains and tourism," chief economist Nariman Behravesh and executive director Sara Johnson wrote, adding that the Chinese government's response to contain the outbreak was "much faster" than during the SARS epidemic.

Novel coronavirus has killed 2,012 people and infected more than 75,000 as of Wednesday. The virus has spread to at least 26 countries, with single deaths in Japan, Hong Kong, the Philippines, Taiwan, and France reported so far.

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