2020’s Black Swan: Coronavirus

From Goldman Sachs Research, this is Alison Nathan. Welcome to Top of Mind, a podcast that explores macroeconomic issues on the minds of our clients. Heading into this year, there was no shortage of global concerns on the horizon, from geopolitical tensions in The Middle East and North Korea to a high stakes election year here in The US. But the event that no one expected was the current outbreak of COVID nineteen. As we know by now, COVID nineteen is a coronavirus that first emerged in the populous city of Wuhan, China and is now proving to be more infectious and virulent than the common flu.

We know, thanks to the extraordinary research and scientific work in China, the DNA sequence, they got it right within ten days, put it up so that every scientist in the world could start to think about how to set up diagnostic tests, which were set up in a matter of days in China, and how to go do things like make drugs and vaccines. So we know a bit about the virus. I think it's astonishing that the science has moved so quickly. We know that it is spread from person to person. We know something about a key figure, which is the effective transmission rate, which is how many people get disease

We're hearing a lot about the two percent mortality rate. Yeah. Does that provide any information really?

Not really. And the reason is the mortality rate is dependent on how many people die, and that's the first thing we know about any outbreak is how many people go to a hospital and how many people die in the hospital. And that number is always outrageously high and panics people. But what we don't know at this point is the total denominator of how many people are infected with this virus. In the case of SARS, virtually everybody infected was sick. So if you followed sick people, you pretty much could guess what the denominator was. But in this case, there is increasing evidence of asymptomatic

I then asked doctor Osterholm what makes this virus different and similar to previous outbreaks. You've expressed some skepticism over comparing this virus to the two thousand and three SARS epidemic. Why do you think that's an inaccurate comparison?

We have to be very careful about comparing a coronavirus infection like this with what the coronavirus is and how they are transmitted and the seriousness of the illness. In a sense, with both SARS and MERS, two very concerning coronavirus spillovers that occurred from animals into humans. In both of those instances, the majority of the transmission occurs well into the patient's illness, meaning four or five or six days of clinical illness before they really become infectious. While they have a much higher case fatality rate with SARS about ten percent, NERS as high as twenty five to thirty p

What about to the nineteen eighteen pandemic? Well,

I think this is a more reasonable model to consider, but I would say that there is no evidence at this time that the actual case fatality rate is what we saw in 1918 where in some cases by age population we saw three or four percent of the population dying. What was also different about 1918 was the fact that the largest number of deaths actually occurred among young healthy adults as opposed to the older population. In this outbreak, we're seeing a preponderance of cases in those 50 years of age and particularly those who have underlying health conditions. So this is also presenting as a very

In terms of the spread of the virus and how bad it may or may not get, both Bloom and Osterholm agree. We just don't know how the situation will ultimately evolve, but a wider global spread is l