(EDIT: See new scenario tracker based on the 4 cases outline here)





Hard facts on the coronavirus are surprisingly hard to come by.





It is unclear how many are currently infected. Not only because the numbers from China are inherently unreliable (lets not forget that China deliberately drove sick SARS patients around in ambulances to hide them from the World Health Organization back in 2003), but even if you trust China’s data it is clear they are hitting the limits of their testing capacity.

Officially, just over 40,000 people have been confirmed to be infected with the virus in China. However a study in the Lancet estimated back on January 25th that 75,000 people had already been infected and that the virus was doubling every 6.4 days — which would suggest that more than 300,000 people may now be infected with the virus. But no one knows the true number. Probably not even President Xi.





Even outside of China the numbers are unclear. The head of the WHO tweeted today that we may only be seeing the tip of the iceberg of infected cases:













It is still unclear how exactly contagious the virus is.There is still a large range of possible R-nought values for the virus. The R-nought (R0) value, is a measure of how transmissible a disease is, it shows how many people each infected person infects in turn. Most estimates have put the R0 value between R2 and R4 (meaning that each infected person infects 2–4 other people). This is fairly high and does not bode well for hopes of containing the virus. But, it’s also still unclear if China has been able to lower the average transmission rate with their draconian lockdown and quarantine of entire cities.





Perhaps most crucially at this point, it is unclear what the mortality rate of the virus is. Estimates seem to range between 1% and 5%. But it is honestly impossible to determine the mortality rate at this point for a number of reasons.

Firstly, because it’s totally unclear how many people have been infected with only mild symptoms. If a million people have already been infected, the vast majority may never see severe symptoms and the mortality rate may be quite low. However, it’s also unclear if the deaths in China are being fully counted. There are many reports about patients dying before being tested and the deaths not counting on the official totals. We will have to wait to get a clear picture of the mortality rate.





That being said, Hubei province released their official fatality rates yesterday and some cities had rates as high as 4% and 5%. Although this number is fairly meaningless in objective terms for the reasons outlined above, it is telling that these rates are much higher than the official rates in other regions of China and suggests that the mortality rate may rise significantly if the healthcare system becomes overwhelmed as it has in these hardest hit regions of China. This is troubling given the WHO has stated that 15% of patients developed pneumonia and 3–5% required intensive care. Moreover, reportedly the virus does serious damage to people’s lower respiratory systems — supposedly it can take “…at least six months for patients to recover heart and lung function.” If this becomes endemic across the world, even developed nation’s healthcare systems will struggle to provide care.





Mortality Rate Based on Data Outside Mainland China

If we calculate the case fatality rate (CFR) based on the limited data outside of mainland china, we can arrive at our own — very tentative — fatality rate.

Outside of mainland China there have been 461 confirmed cases of coronavirus. Of these cases only 46 have been resolved. 44 cases recovered, and 2 died.

Using these numbers we would arrived at a case fatality rate of:





((2 * 100 )/46)/100) = 4.34%





Obviously, there is too little data for this calculation to be meaningful, but this is the metric that should be watched if you do not trust the numbers coming out of china.





The Economic Impact





Even if the virus can be contained in China, the impact may be devastating for the economy of the country.





One thing that we do know about the outbreak is the unprecedented and draconian measures the Chinese government has taken to slow the spread of the virus. Some 400 million Chinese are now under some form of quarantine across China — in some of the most economically important regions of the country.









Red areas under some form of lockdown. Source: Wuhan Coronavirus Map by Fuuuuuuu · MapHub

Factories are shut down, inflation has already surged to an 8 year high(with food price inflation at 20.6%), and some economists are already predicting that China’s GDP growth will fall to 0% for the next quarter. And the economic damage will increase exponentially if the quarantines are maintained for much longer. To quote an excellent piece from The Telegraph:

…the more thoroughly China enforces this, the greater the global economic shock is likely to be. How can industrial plants really be reopened next week? Yet if it takes another month, it becomes progressively harder to contain the international economic damage, and raises the risk of a Minsky Moment within China’s own hyper-leveraged system keeps rising.





Possible Outcomes

Essentially we don’t know enough hard facts about the virus and China’s success (or failure) in containing the virus to predict the impact on the world.However, we should be able to make some reasonable predictions within the next 3–4 weeks. By then we should get a better idea of the case fatality rate from cases outside mainland china. We’ll also be able to see if the virus continues to spread around the world over the next month despite china’s draconian quarantine measures.A wide range of scenarios are plausible at this point of the outbreak. Everything from from slightly worse than the typical flu — to something on par with World War II. You could make a case that the mortality rate is likely to be on par with the seasonal flu — and anyway China is likely to contain the virus. Or, you could make the case that there’s some very troubling initial data coming out of China and the communist government is certainly going to unrepresented lengths (at a great economic cost) to try to contain the outbreak.





Case 1 — The Optimistic Scenario

In the optimistic scenario, a month from now we can calculate, from data outside mainland china, that the CFR is perhaps .3% or below. Moreover, the spread of the virus outside mainland china will stabilize and we will not see additional community spread in other countries. This would be a good indication that China’s containment measures worked at the R0 value has fallen to 1 or bellow.In this case China will probably make a quick economic recovery, and the virus will be on par with the H1N1 (Swine flu) pandemic of 2009.





Case 2 — Pandemic with Low CFR

In the case two scenario we will be able to calculate that the CFR of the virus is fairly low. Somewhere between .1 % and 1%.However, the virus is not contained to China and we see sustained community spread in multiple countries outside of China.This means that the virus would spread — but it would be about as bad as the flu or perhaps 10X as bad as the flu. At the low range of this the economy would make a fairly quick recovery and at the high range it could be a moderate drag on global growth.





Case 3 — Pandemic with Moderate CFR

In this scenario the virus in not contained within China — and the CFR is somewhere around 2%. Anecdotally this appears to be the current base case assumption among the experts.The closest historical analogy to this would be the 1918 influenza pandemic. This would almost certainly have a fairly large economic impact. Hospitals might be overwhelmed, people would be wearing masks on the street. Millions could die in the United States and other developed countries.





Case 4 — Worst Case Scenario. Pandemic with High CFR.





In the worst case scenario the virus is not contained in China, and it in ends up having a CFR or somewhere between 3%–7%. Maybe the fatality rate is slightly worse than we hope — and healthcare systems become overwhelmed causing the mortality rate to rise substantially. In that case, this is The Big One.





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