COVID-19: Impact on the Global Economy

COVID-19: Impact on the Global Economy

The world, as a whole is going through one of the most testing times in recent history. [The COVID-19 outbreak which broke out in Wuhan and then spread to all over the world has been declared a pandemic by the WHO.][ It has so far claimed more than 9000 lives and infected more than 2 lakh people worldwide.]

On one hand where this pandemic has created a health havoc, people are being advised to practice social-distancing, remain at home unless absolutely necessary to step out, wash hands frequently, avoid travelling, etc. in the majority of the countries on the other hand it has crippled the global economy and dwindled global markets. 

Since people are advised to avoid going outdoors and travel less, [Flights are being cancelled, offices, industries, factories, markets are being shut down.] The wound of the already sick global economy is salted. 

According to the United Nations, “the outbreak could cost the global economy upto $2 trillion this year”. And, it has called governments to take urgent steps to reduce the economic impact.

It all started with China. Since, China was placed under a lockdown, the factories and industries were completely shut. [This disrupted global supply chains as China is an important exporter of various items which are used in one or the other stage of either  production or manufacturing or final product.] 

[This was followed by a crash in oil prices due to the collapse of OPEC+ alliance (between OPEC members and Russia) on a disagreement on the issue of price and production of oil.] This was a consequence of fall in oil demand from China which was under lockdown.

Whether developed or least developed, all countries are facing the impact of economic slowdown. 

The economies all around the world are connected via trade, directly or indirectly. Therefore, shutdown or blockage of trade from even one country impacts other countries. Specially, least developed countries, which rely on the export of raw material mostly for driving their economy are badly hit.

Even the demand side of the economy is suffering, [as people are not going out and not spending. Sectors like hospitality, aviation, tourism are all gravely strained.] 

Countries such as Maldives, Thailand, etc. which drive their economy primarily on tourism are also badly affected. A lot of people find employment in the tourism industry. So, this impact will cost people their source of livelihood.

One thing which harms the economy or a business more or less is uncertainty and in this case, uncertainty is the only certain thing uptill now as no one is sure when the virus will be contained. [There is no vaccine developed particularly to combat coronavirus as of now and new epicentres and hotspots are emerging.] The new epicentre being – Europe, particularly Italy and Spain. Iran has also emerged as a new hotspot.

[In India, stock markets have crashed and are at all time low, sensex lost 10,000 points last month.] Daily-wage labourers are rendered work-less and hence their everyday existence is becoming difficult. It is however said that since India’s exports of goods and services comprise about one-fifth of the total economy- not much effect will be seen on the Indian economy. And also the falling oil prices will provide decent revenues to the Government.

[According to estimates GDP dip of 0.3-0.5% is expected in the next fiscal year.] 

The middle-class, lower-middle class and poor sections of the society will suffer the most since, incomes, daily-wages will be blocked due to shut-down of businesses and any kind of work. 

However, more trends are expected to emerge since the number  of cases are increasing everyday. [Currently, India is in second stage of transmission, i.e. “local transmission”.] It is imperative to take steps such as shutting off public places so that we do not reach the [Third stage which is “community transmission”] which will be very difficult to contain.

[Government is taking necessary steps such as banning all foreign flights, testing suspected cases.] But, testing needs to be more widespread. Including private labs in testing is a good step but it must be ensured that these tests are done free of cost. [Appropriate monetary policy interventions must be there in such a way that every strata of society is taken into confidence.]

 

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