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If the current coronavirus outbreak represents the second coming of SARS, the economic impact should be modest and transitory, according to a new report from Scotia Economics. For now, rising fear is the biggest threat.

Fears of a possible coronavirus pandemic are rising and making investors jittery amid heightened uncertainty, the report stated. And the fact that the virus has now been confirmed in Canada recalls the SARS epidemic of 2003.

“Arguably the biggest (economic) lesson from that experience is that fear is the biggest risk to the outlook,” Scotia stated.

The direct impact of SARS was tough to pin down, it noted, given the prevalence of other events, such as the U.S. invasion of Iraq and a slowing U.S. economy, that were in play at the time.

The Bank of Canada estimated the impact of SARS as a 0.1% hit on GDP, Scotia noted.

“While it is premature to predict the path of today’s coronavirus outbreak, we estimate that a SARS-equivalent pandemic today could have a similar impact on the Canadian economy with an estimated hit of just over 0.1% on the level of GDP by mid-2020, at which point a pandemic should be contained,” the Scotia report stated.

Under this scenario, China’s GDP would take a 1% hit, likely denting global commodity prices. For example, oil prices could be 4%–5% lower in the first half of 2020.

“Assuming peak severity in the first half of 2020, the main impact on Canada would likely be indirect, from lower commodity prices and a drop-off in travel-related industries,” the Scotia report stated.

Yet, the estimated impact faces significant uncertainty, the report acknowledged, with risks likely to the downside.

“The contagion of fear should not be underestimated at this juncture,” it said.

“The onus will be on governments to convey a sense of control and pre-emptively deploy policy levers where possible, otherwise they risk a potentially magnified (and outsized) impact that extends well-beyond what can be predicted by economic drivers alone,” Scotia concluded.