• While some sporting events have already been affected by the virus outbreak, the Tokyo 2020 Olympics remain on track. In a worst case scenario, failure to contain the virus would reduce attendance at the Olympics, leading to further downward adjustments to the outlook.

• The Chinese economy was already struggling from elevated trade tensions and domestic imbalances before the coronavirus disrupted all sectors. The sharp reduction in economic and social activity has led to massive declines in discretionary consumption and passenger traffic, alongside factory closures. In our base case, we expect the impact to be high but short-lived, with recovery in the second half of the year. But as we discussed recently, a prolonged encounter with the virus could lead to a series of defaults and create financial instability. 

• China's government has attempted to counter the economic fallout from the virus. The People's Bank of China cut a key interest rate and injected large amounts of cash into money markets to help take the pressure off banks and borrowers. Tax breaks and subsidies were also announced to help consumers as supply constraints may increase inflation. In a worst case, Beijing may pump money directly into the economy, forsaking its efforts to rein in its debt.

Carl R. Tannenbaum is executive vice president and chief economist at Northern Trust. Ryan James Boyle is a vice president and senior economist within the Global Risk Management division of Northern Trust. Vaibhav Tandon is an associate economist within the Global Risk Management division of Northern Trust.

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