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The Impact of COVID-19 on the Global Economy; Comparing and Contrasting SARS with COVID-19

Harriet Herbert compares and contrasts the nature and likely effect of the COVID-19 Pandemic with that of the SARS epidemic. The article explores multiple facets of how the global economy has already been affected, as well as what the longer-term consequences are likely to be.


The economic fallout from an epidemic is felt through increasing unemployment, supply-chain disruptions, and reduced spending in specific sectors as a result of panic and quarantine policies. While one specific outbreak cannot precisely set an exact blueprint for the effects of another, one outbreak may be used to illustrate the analogous effects of other outbreaks. This article will analyse the economic impact of SARS, in order to speculate about what we may expect from COVID-19. SARS will be used, comparatively, to demonstrate how the effects of COVID-19 will likely be more severe and longer-term in nature, compared with anything the global economy has faced before.

The Chinese economy has been selected as a focal point of this analysis, as it is arguably the most significant player in the global economy. In 2019, the International Monetary Fund estimated that China alone accounted for 39% of global economic expansion.[1] The health and continued growth of the global economy is largely dependent on China, especially when it comes to manufacturing. As the region in which the viruses first began to spread, it has been on the frontline of both the SARS and COVID-19 epidemics.

The economics of a pandemic

There are two overarching reasons as to why the COVID-19 outbreak will have a much more severe and long-lasting economic impact when compared with SARS. Firstly, the unprecedented nature and spread of the virus itself means that it operates on a much larger scale. Secondly, the increasing interdependence, and as a result, vulnerability, of the global economy in 2020 compared to that of 2003 means that the disruptions to travel and trade are far more onerous. For these reasons, there is a high probability that the global economy will suffer greater damage as a result of the current virus compared with what was experienced during and after SARS.

In the US, the unemployment rate rose by 10.3% in April 2020, exemplifying the sustained impact of the virus on the labour market.[2] Retail sales, consumer confidence, and factory output, have all seen historic declines.[3] Retail in the UK posted the most dramatic decrease ever recorded, with a reduction of 34.8% in the fashion and clothing sector against last year.[4] Businesses such as Debenhams, Oasis and Warehouse group, and Cath Kidston have entered into administration due to the decrease in sales.[5] The World Bank estimates the COVID-19 global recession will be the deepest since World War II.[6]

Comparing coronavirus strands and their potential for harm

The Severe Acute Respiratory Syndrome (SARS) coronavirus strand emerged in 2002 and is thought to be zoonotic, which means it originates in animal hosts. This virus first infected humans in southern China before spreading to 26 countries and over 8,000 people, killing almost 800. Immediately, there are parallels with COVID-19 given the zoonotic character of both viruses and their spread throughout South East Asia. However, COVID-19’s spread surpassed that of SARS within only 8 days of its outbreak. The number of cases and fatalities associated with the current pandemic are in a league of their own - with 12.5 million confirmed cases and 560,000 deaths as of the 11th of July 2020. Although SARS was more lethal, with a fatality rate of 9.5% compared to 2.3% for COVID-19, its impact was confined to China and a handful of geographical hotspots. COVID-19 has much higher transmissibility, posing a greater and more longer-term risk to the world economy and public health as we struggle to contain it. The use of containment policies in more and more countries, decimating global trade for a lengthy period, will undoubtedly have a negative effect on global growth. This point is illustrated by the Organization for Economic Cooperation and Development; estimating that the decline in the level of output as a result of strict COVID-19 lock-down measures is equivalent to a 2% loss to annual GDP growth per month.[7]

V, U, W or L?

The lasting economic impacts of SARS were avoided by a quick recovery period, made possible by the non-recurrent nature of the virus. When examining the post-SARS period, the data demonstrates a ‘V-shaped’ return to normality. Studies by Keogh-Brown and Smith[8] have examined models produced during the outbreak, many of which suggested that SARS would have had a catastrophic impact on the global economy. These models, compared to reality, show that SARS’ impact was much less severe than anticipated, as the virus abated abruptly, and economic confidence returned resulting from strict lockdown measures preventing the virus from going global.

Due to COVID-19’s heightened transmissibility and its spread to almost all regions around the world, the difficulties in limiting its recurrence are evident. As stated by the World Economic Forum, ‘as long as there are susceptible and infected people in the population, the virus can spread’.[9] To use the traditional public health measures, which were successful in eradicating SARS, containment would have to be sustained and coordinated around the globe – an effort which is far more difficult and complex to sustain. Our inability to do this may cause more extreme, long-term damage, including lasting market uncertainty. A failure to quickly recover indicates that the COVID-19 recession is more likely to take on a ‘U’ (gradual recovery), ‘W’ (the second wave of infections) or ‘L’ shape (a severe recession and long-term stagnation of growth).[10]

In analysing SARS to speculate about the impacts of COVID-19, it should be considered that although they may be similar, the effects of COVID-19 will simply be an echelon higher, given its scale.

Nature of the global economy

The second overarching reason that COVID-19 poses a greater threat than that of SARS is due to the current nature of both the Chinese and global economy.

The virus has hit at a time when the world economy is more interconnected and vulnerable than ever before. Globalization has tied markets together to create an economic system based on international free trade. The benefits, such as development and the widespread use of technology, go hand-in-hand with systemic risks. COVID-19’s disruption to the global supply chain is just one current manifestation of these risks - demonstrating an over-reliance on outsourced goods and services for particular countries. Persistent PPE shortages throughout the current pandemic exemplify the market failure of the internationalised and fragmented medical supply chain which prioritise ‘efficiency over adaptability’.[11] As changes within one economy have the capability to cause international shockwaves, our current economic reality necessitates a cooperative and comprehensive recovery effort. The escalating trade war between the USA and China, coupled with ever-increasing political tension is unlikely to create an environment that is conducive to this. US-China relations and deteriorating discourse regarding the Phase One Trade Deal indicates increasing tensions that may only become worse in the recovery period. This will impede the cooperation essential to reviving the global supply chain and, coupled with reactionary trends towards self-preservation, will display the potential of COVID-19 to slow globalization and economic recovery generally.

Populism in crisis

Failed crisis management under populist leadership displays a political reality which further impedes global economic recovery. Populism was taking the largest democratic states by storm pre-COVID-19; the United States under Trump, the United Kingdom under Johnson, Brazil under Bolsonaro, and the Philippines under Duterte. In drawing authority through representing ‘the will of the people’ – populist leaders have adopted analogous strategies to consolidate their influence in a crisis. A laissez-faire approach based on denial has been demonstrated by Trump, who claimed that the virus was the Democrat party’s ‘new hoax’ and that ‘it will go away’.[12] Containment measures in the US were, as a result, introduced two months after the virus’ outbreak in South Korea. In addition, populist leaders have employed the rhetoric of ‘fake news’ to reject the ‘institution’ of scientific knowledge. Bolsonaro demonstrates this in his labelling of COVID-19 as a ‘little flu’ and ‘media trick to force him from power’.[13]

We can objectively contrast these governments to ones such as Trudeau in Canada or Arden in New Zealand – both of which have perceived the severity of the virus and acted decisively, on scientific recommendation, to contain it. Empirical evidence supports this response, with 1,193 cases and 22 deaths in New Zealand, and 106,000 cases and 8,749 deaths in Canada as of the 11th of July 2020. This can be compared to the US and Brazil, both of which are currently facing the highest mortality and infection rates in the world; with over 3 million cases and 132,000 deaths in the US, and nearly 2 million cases and 69,000 deaths in Brazil as of the 11th of July 2020.[14] It is yet to be seen how the virus will change political realities and the rise of populism – but it is certain that a swift, global economic recovery has been impeded by the inability of specific governments (and key economic players) to contain the virus.

The prominence of the service sector

The major economic impact of SARS was felt within the retail, service, and tourism industries. Of course, heavily tourism-dependent economies were most vulnerable, such as Singapore and Taiwan.[15] Crucially, during the outbreak, the mainland Chinese economy was largely investment-based. The virus slowed China’s economic growth from 11.1% in the first quarter of 2003 to 9.1% in the second - before rebounding to 10% in the third and fourth quarters.[16] In the years since then, China’s annual economic output has multiplied from $1.7 to nearly $14 trillion,[17] and its share of global trade has more than doubled since 2003.[18]

In 2020, there has been both a global expansion of the service sector, as well as a shift towards consumption. Lower consumer spending as a result of the virus will put pressure on the services industry, which today accounts for around 54% of GDP compared to 40% in 2003 (Lee, 2020). The country’s consumer and services portion of GDP has been the largest portion for eight years running and consumption currently accounts for almost 60% of growth. As a result, the Chinese economy is extremely vulnerable and faces greater challenges in recovering from losses in key sectors. The loss to the global economy was estimated to be around $40 billion from SARS. In May 2020, the Asian Development Bank predicted that COVID-19 could cost the global economy between $5.8 and $8.8 trillion.[19]

The impacts of the current health crisis on consumption and the service industry pose a massive threat to the Chinese, and global, economies in 2020. Increased reliance on the most at-risk sectors means greater vulnerability and losses. The effects of SARS were mostly geographically confined and short-term due to characteristics present within the 2003-4 markets, which have since changed. The characteristics of the current economy, such as its increased interdependence and reliance on the service-sector, means that COVID’s impact will likely be worse and more persistent than previous epidemics.


Surveys suggest that China is already displaying signs of an economic rebound through increased consumer spending.[20] The huge recovery effort reflects positively on the ability of the global economy to follow this precedent. However, it is almost certain that this recovery will not be as straightforward and V-shaped as SARS. China’s internal, consumer-driven recovery can only go so far to amend a threat to the global economy. Real challenges are yet to be overcome - such as the continued disruption of the global supply chain by the failure of specific countries to contain the virus. Until trading partners begin their own recovery, China’s rehabilitation will be limited. Currently, supply is significantly outpacing demand, and as the US is still facing 68,000 new cases of per day,[21] the global turning point is yet to be seen.

Written by Harriet Herbert.


[1] International Monetary Fund, “Prolonged Uncertainty Weighs on Asia’s Economy” (International Monetary Fund, 22 October 2019) Accessed 11 July

[2] US Department of Labour, Bureau of Labour Statistics (2020) The Unemployment Situation – April 2020 [Press Release]. 30 April. Accessed 10 July

[3] US Department of Commerce, Bureau of Economic Analysis (2020) Gross Domestic Product, 1st Quarter 2020 [Press Release]. 29 April. Accessed 10 July [4] Office for National Statistics (2020) Retail Sales, Great Britain: March 2020 [Press Release]. 24 April. Accessed 9 July [5] Cally Russell, “Worst Ever Decline In U.K. Retail Sales Due To Coronavirus” (Forbes, 24 April 2020) Accessed 10 July [6] The World Bank (2020) COVID-19 to Plunge Global Economy into Worst Recession since World War II [Press Release]. 8 June. Accessed 9 July [7] Organisation for Economic Co-operation and Development, “Evaluating the initial impact of COVID-19 containment measures on economic activity” (OECD, 10 June 2020) Accessed 11 July [8] Keogh-Brown, M.R. and Smith, R.D. (2008) ‘The Economic Impact of SARS: How Does the Reality Match the Predictions?’, Health Policy, 88 (1), pp. 110-120. Accessed 11 July [9] Adam Kleczkowski, “Coronavirus: what a second wave might look like” (World Economic Forum, 4 June 2020) Accessed 9 July [10] David Rodeck, “Alphabet Soup: Understanding the Shape of a COVID-19 Recession” (Forbes, 6 July 2020) Accessed 10 July [11] Tara Lagu, Rachel Werner and Andrew W. Artenstein, “Why don’t hospitals have enough masks? Because coronavirus broke the market” (The Washington Post, 21 May 2020) Accessed 8 July [12] Jake Lahut, “5 times Trump and US officials downplayed coronavirus as the administration struggled to prepare for the growing pandemic” (Business Insider Australia, 13 March 2020) Accessed 12 July [13] Tom Phillips, “Brazil’s Jair Bolsonaro says coronavirus crisis is a media trick” (The Guardian, 23 March 2020) Accessed 12 July [14] World Health Organization (2020) Coronavirus disease (COVID-19) Situation Report – 173. [Press Release] 11 July. Accessed 12 July [15] Lee, G.O.M. and Warner, M. (2005) ‘The impact of the SARS epidemic in Taiwan: implications for human resources, labour markets, and unemployment in the service sector’ Issues & Studies, 41 (3), pp. 81-111 Accessed 9 July [16] Michael Meidan “When China sneezes…” (Oxford Energy Comment: The Oxford Institute for Energy Studies) Accessed 10 July [17] The World Bank. GDP (current US$) – China. The World Bank, Data. Accessed 10 July [18] Peter S. Goodman “SARS Stung the Global Economy. The Coronavirus Is a Greater Menace” (The New York Times, 3 February 2020) Accessed 9 July [19] The Asian Development Bank (2020) COVID-19 Economic Impact Could Reach $8.8 Trillion Globally — New ADB Report. [Press Release]. 15 May. Accessed 10 July [20] Tang Ziyi “Update: China’s Economy Shows Signs of Recovery Amid Government Support” (Caixin Global, 15 May 2020) Accessed 11 July [21] The New York Times “New Coronavirus Cases in U.S. Soar Past 68,000, Shattering Record” (The New York Times, 10 July 2020) Accessed 11 July


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