How Coronavirus Is Affecting Global Economy?

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global economy

The coronavirus outbreak, which originated from China, has affected over 185 countries across the world. The spread of this disease has led many businesses across the globe counting the costs. The markets have gone down by 35% , credit spreads have increased to 2008-levels and the credit markets are completely seized up. The shock which the global economy received through the pandemic, has been both severe and faster when compared with 2008’s financial crisis.

A quick analysis of the stock market

global economy

It took only 15-days for the US stock market to decline around 20% from its peak, and it is the fastest decline ever to take place. Mainstream financial companies like JP Morgan, Morgan Stanley, and Goldman Sachs believes that the US GDP will fall by an annualized rate of 6% within the 1st quarter and 24% to 30% by the 2nd quarter. Experts say that the global economy might shrink by 1% in 2020 due to COVID-19.

Experts have predicted that it may contract even further if the restrictions are extended on the economic activities with no appropriate budgetary response. Coronavirus has disrupted international grade and the global supply chains among the nations, and over 100-countries have already shut down the national borders last month. This has caused tourism activities and physical movement to pause as well. Along with that millions of workers from these countries are currently at the risk of losing their respective jobs.

Business shutdowns

The coronavirus or COVID-19 pandemic has affected many businesses, companies, and nations to hit rock bottom. Many industries have received a fatal blow as far as operations are concerned. Here’s a quick look at the various other ways coronavirus has affected the global economy.

The oil prices have crashed

Due to lockdown across various countries compelling everyone to stay indoors, the demand for oil is said to be gone down completely. Brent Crude, which is considered to be a benchmark used by both Europe and the rest of the world, has seen a reduction of below $20.

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This is considered to be the lowest that is seen in the past 18-years. But on the other end, the price of a West Texas Intermediate barrel has turned negative for the first time in the history of the United States.

Impact of COVID-19 on the stock market

The investors are currently living in fear as the spread of the COVID-19 will shatter the economic growth, if the respective governments don’t take proper actions to stop the spread from increasing. Central banks across various nations, which include the United Kingdom, have slashed down the interest rates. This makes borrowing to be much cheaper and it encourages more spending to boost the economy. The global economy markets have said to recover some ground during March, after the US Senate passed down a $2trillion aid bill, to help businesses and workers.

But many analysts have issued a warning that it could be evaporative until the coronavirus pandemic is contained.

More and more people are looking for work

The total number of individuals who have filed for unemployment has hit a top record in the US. Over, 30million people across the entire nation have filed in for the benefits of unemployment with the last 6-weeks. Apart from the US, about 1million people in the United Kingdom have also filed in for the unemployment benefits within 2-weeks by the end of March.

The rush within the universal credit applications followed by government measures to shut down pubs, non-essential shops, and restaurants has caused many of the workers to lose their jobs or become unemployed. It is considered to be a huge blow to the global economy that might increase if the spread is not handled properly.

The chances of a recession are high

If the economy keeps growing, the need for fresh jobs and wealth generation will increase as well. This is measured by looking at the GDPs or by the value of the services and goods, over three months or a year. The experts have predicted that many economies might go under the recession period, but the IMF or the International Monetary Funds have already said that the global economy will decrease by 3% this year. Apart from that, the IMF also said that the decline will be much worse than the 1930s Great Depression.

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Even though the COVID-19 is dubbed as the biggest crisis in history, but the global economy is expected to grow by 5.8% by 2021. It is only possible if the ongoing threat of the coronavirus pandemic fades by the 2nd half of 2020.

Travel and tourism receive the hardest hit

global economy

The global economy has received an enormous blow due to the COVID-19 pandemic, and out of all the travel industry is one that is badly damaged. This is because, the airlines are cutting down the flights and customers who have booked for flights have been canceling holiday and business trips. Everything went downhill for the travel industry when governments across the world have announced a travel ban or travel restriction to contain the spread of the virus.

Over 100 countries across the globe have restricted or banned travels due to COVID-19. US President Donald Trump has banned travelers from the European airports, the EU banned travelers from entering for 30-days as the COVID-19 crisis started in March. With so many bans and restrictions for traveling, the businesses within the travel industry are shutting down, which is coming out as a major blow towards the world economy, and many airlines have already shut down as well.

The bottom line

The coronavirus pandemic is still growing and it has affected numerous people across the globe. Every single nation has experienced death tolls as well as fresh cases every day. Innumerable individuals have also lost their lives. Although the governments of all the nations are putting in their best efforts to curb the effect of this virus, the economic downfall seems to be inevitable. Needless to say, the lack of proper exit strategies and preventive measures can escalate the issues to a great extent, and world economy can experience new lows!

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