The ASX200 shed 2.3 per cent in value to finish at 6978.3. The biggest fall was for Reliance Worldwide which suffered a 26 per cent fall in its share price. The plumbing and heating company reported supply problems out of China, noting the re-starting of factories of parts suppliers had been slower than expected.
The International Monetary Fund believes the virus outbreak will have a measurable impact on China’s economy through the first three months of the year. The flow on effects are likely to hit the May federal budget, as the Morrison government plays down expectations of a surplus it had promised to deliver this time last year.
The IMF had forecast the Chinese economy to expand by 6 per cent through 2020. But because of the coronavirus outbreak [COVID-19], it now believes it will expand by 5.6 per cent.
Most of that lower growth will be evident through the March quarter. At 5.6 per cent, Chinese growth will be at its lowest since the start of the global financial crisis.
The fund also believes global economic growth will be 0.1 percentage points lower than had been forecast.
IMF managing director Kristalina Georgieva warned if the virus is not contained, the impact would be larger.
“Global cooperation is essential to the containment of the COVID-19 and its economic impact, particularly if the outbreak turns out to be more persistent and widespread,” she said.
“To be adequately prepared, now is the time to recognise the potential risk for fragile states and countries with weak health care systems.”
In Beijing, President Xi said the “current epidemic situation is still grim and complex,” according to state media agency Xinhua. “Prevention and control are at the most critical stage.”
Mr Xi said the epidemic was a health emergency with the “fastest spread” since the CCP came to power in 1949.
“For us, this is a crisis and a big test,” he said.
The Chinese government has begun implementing stimulus measures including tax breaks to and subsidies to help pump up an economy being hammered by a lack of confidence and deserted streets.
Treasurer Josh Frydenberg, who is returning from Riyadh where he met with G20 global financial leaders over the weekend to discuss the crisis, has not been able to guarantee a surplus since the virus and summer bushfires hit.
“What we do know is that these events outside of our control are going to have a significant impact on the Australian economy,” he said last week.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.