The Coronavirus pandemic spread like wildfire across the globe, affecting not only people and countries but also bringing a slump to economies of different countries. The pandemic, which originated in China, so far infected more than 200,000 people and has left several businesses around the world counting costs and laying off employees. According to the Wikipedia source, Coronavirus impact on the global economy in early 2020 caused the coronavirus recession, also known as great shutdown or great lockdown which is an ongoing service global economic recession
Let us now look into how coronavirus impacted the world economy.
The outbreak resulted in the shutting down of air, rail, and road routes in China, as well as companies and organizations that opted for production cuts and temporary closures of several manufacturing plants. This move would cut billions of dollars from China’s annual GDP. Big companies like Apple closed stores and manufacturing in China temporarily, while huge telecom companies like Huawei suspended travel to and from China. The National Bureau of Statistics (NBS) of China announced that the purchasing managers’ index (PMI) for China’s manufacturing sector stood at 35.7 in February, which declined from 50 in January. This rating was based on a survey conducted of 21 industries that pertained to the manufacturing sector, all of which registered a considerable contraction.
In the last 40 years, China recorded an average GDP growth rate of 10%, which has declined drastically due to the coronavirus impact. Also, the Coronavirus pandemic hit the Chinese economy when it is slowing down and the nation is struggling to find new growth drivers amid heightened trade tensions with the United States.
Italy is the world’s eighth-largest economy, and at present, the entire country is on coronavirus lockdown. Italy has recorded more deaths than China from the pandemic and the country at present is desperately trying to contain and save its people from the virus. In Italy, Businesses across the country are restricting nonessential work, and every transport hub is at a halt.
The Italian government has pledged $28bn to relieve the burden of the coronavirus impact. This includes helping businesses, companies, homeowners with mortgage payments as well as people from facing unemployment. Also, Italy needs all the support it can get to recover from Europe’s debt crisis. The debt stands nearly 135% of GDP and growth since the introduction of the euro, almost 20 years back, has barely grown. Economists from around the world have warned that the coronavirus impact could be fatal for Italy’s economic system.
Coronavirus's impact on the U.S. economy has disrupted the global supply of goods, making it harder for U.S. firms to fill in orders. Also, workers have been waylaid across affected areas, thereby reducing labor supply and slowing the demand for U.S. products and services.
The current pandemic situation also creates much uncertainty over the longer term of the U.S. economy. Congress, as well as the Trump administration, can take many measures to counter the risks associated with the spread of Coronavirus by implementing fiscal policies that will bring relief to affected populations and mitigate disruptions across U.S. firms. The disruptions in global supply chains are one of the significant effects of the pandemic. This disruption will make it difficult for U.S. firms to substitute products from other countries for the lack of goods from China.
How this situation affects U.S. firms will depend on how they handle their supply chains. Many U.S. firms organize the time between requiring new supplies from China and implementing them in the production phase as short periods- often weeks and not months. Companies following this would feel the effects of factory shutdowns across China. It will not only affect industries like car manufacturing but also high-tech industries like smartphones and computers. Because of the disruptions in the supply chain, U.S. firms wouldn’t be able to finish their production and thereby cannot bring the products to the markets. This would result in reduced economic activity and growth.
In addition to supply, specific other sectors also will bear the brunt of the pandemic situation, like a decline in demand and reductions in revenue. There are two separate effects to consider in this aspect. Firstly, consumers will purchase lesser goods and services as they are afraid of potential exposure to the virus. Secondly, when firms would shut down, the workers will receive less money or no pay in some instances. As a result, the workers will have fewer finances to spend, thereby cutting overall demand. Due to Coronavirus's impact on economies across the world, U.S. exporters will also find it harder to sell their products around the globe and thus have a negative consequence for U.S. growth and jobs.
The current health risk poses real economic uncertainty, as many households have inadequate health insurance, and they would be left with large doctors’ bills when they are sick. Also, most Americans do not have paid sick leave, which means if these people are suffering from Coronavirus disease, they wouldn’t be paid.
Japan would be the hardest hit among all the countries, with the Tokyo Olympics likely to be postponed. The exports from Japan slipped drastically with U.S. and China-bound shipments stagnant and business activities across the world almost to a standstill. As per the Finance Ministry, Japan’s exports reduced to 1.0 percent from a year in February. Even before the Coronavirus impact, Japan was already sliding towards a possible recession, with the country's GDP steeping to 6.3% in the fourth quarter, and hit by reduced consumption with an increase in the national sales tax. The virus outbreak will only worsen the situation.
The Tokyo stock market fell 9.6% in the week. In addition to the Olympics, other sporting events are also on hold like the Japan soccer league, which has abandoned all its matches through March 15. The Tokyo Marathon, which usually attracts thousands of tourists from across the world, has been scaled back to only a small contained group. Even the popular entertainment resort Tokyo Disneyland shut its doors for at least two weeks.
Business activities in the United Kingdom have plunged to a record low due to the Coronavirus pandemic. This would likely result in a deep recession, as economists warned. The purchasing managers’ composite index in the U.K. fell to 37.1 in March. Services, which total to around 80% of the U.K. economy, fell to 35.7, from 53.2 in February. The Coronavirus impact on the U.K. economy was a major blow, a shock much higher than a global financial crisis. There is also a reduced demand, with many households and businesses shutting down.
The initial impact of emergency public health measures, such as increased working from home and the call to adopt social distancing, was reflected in a sharp deterioration in customer-facing services activities, transport, and travel, as well as the broad business-to-business services category. Manufacturing activity deteriorated at a slower pace than services: its index dropped to 48 in March, from 51.7 in the previous month. The milder contraction partially reflects the increased output of food and drinks as well as plastics, driven by household stockpiling of food and a surge in demand for pharmaceutical products.
A 21-day lockdown impact on the Indian economy may take a longer time to recover. Sectors like tourism, hospitality, aviation, transportation, and restaurant businesses have come to a halt across the nation. While the hospitality sector is projected to face 30,000+ crore revenue loss, the aviation sector will report losses of more than 8,200 crores in the coming quarter as international and domestic flights are grounded. The brunt of the shutdown of the industries will be borne by the employees who will face an adverse impact on their lives and livelihood. The National Restaurants Association of India (NRAI) has warned that 10-20% of job losses among its 7.3 million employees in restaurants would mean that 15 lakh people are unemployed.
The Coronavirus pandemic arrived in India at the wrong time as the quarterly GDP growth rate is at a multi-year low of 4.7%. India is not immune to the Coronavirus impact and could face a severe slowdown in domestic growth. The present situation is raising concerns over the economic health of India in the next financial year. The aviation industry is the hardest hit, with fares crashing as much as 40% on specific air routes. The cancellations of travel have directly impacted the hospitality sector, with hotel chains in India predicting a loss of $4.2 billion to $4.7 billion in revenues. The tourism sector in India, which accounts for around 10% of the country’s GDP, is failing with visa restrictions and travel suspensions.
In terms of the apparel sector, in 2018-19, India exported $16.2 billion worth of garments across the world. The apparel sector contributes to around 43% of textile exports and enjoys about a 5% share in the country’s overall exports. The apparel sector is also the most significant employment provider of the country, after agriculture, and employs 129 lakh workers, of which 65-70% are women. The restrictions on this sector would take a toll on orders and the import of raw materials. Amid the worsening situation, the apparel exporters of the country have asked RBI to take steps to relax the working capital crunch faced by the industry.
The world’s economy is facing a terrible slowdown due to the outbreak and could grow at its slowest rate, as per the Organization for Economic Cooperation and Development (OECD). The think tank has forecast growth of just 2.4% in 2020, down from 2.9% in November. It also said that a “longer lasting and more intensive” outbreak could halve growth to 1.5% in 2020 as factories suspend their activity, and workers stay at home to try to contain the virus.
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