The Far Reaching Effects of Covid-19 on the World Economy

Effects of Covid-19 on World Economy

A new type of virus appeared in China in December 2019 which causes the infectious disease called coronavirus disease. It is a large family of viruses that causes common cold, Middle East Respiratory Syndrome and Severe Acute Respiratory Syndrome. As this virus was not known previously so it is named as Novel (meaning new) Coronavirus. It appeared with different symptoms in different people. Most common symptoms include fever, cough, weariness, fatigue. Some other and less common symptoms are sore throat, throbbing, diarrhoea, loss of taste and smell and skin rashes. Most of the people recovered without hospitalization. It directly affects the respiratory system of a human. Here, experts of a dissertation research firm, The Academic Papers UK will take a brief look on it.

History:

It first emerged in China in December 2019. This endemic overlapped with the most famous travel season of China “chunyun” also known as Spring Festival Travel Season.

Impact on Industry:

According to an estimate of more than a third of the world population is under lockdown which is causing the largest global recession. As this virus is spreading globally, businesses are considering shrinking business in the service sector. Economists are forecasting price extorting and supply shortages on a larger scale as people are stocking more to survive during long lockdowns. China is considered as the factory of the world.  A noteworthy portion of manufacturing takes place in Chinese manufacturing industries. Due to demand deficiency, many companies have changed and revised their business strategies and policies. For example, Apple Inc. has reviewed its revenue management because of a decrease in demand by Chinese buyers and stoppage at manufacturing sites in China. From East to West and South to North all markets and every business and industry is affected by COVID-19. The Tourism department of Thailand reported that last year 90% of the tourists were from China, and 10 million Chinese tourists visit Indonesia yearly. So it is estimated Indonesia is about to lose 4 billion dollar revenue. Coronavirus has brought a recession in the economy. It is for the first time since 1987, the world stock markets have to face the worst crash.

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The demand for medical and personal safety equipment like gloves and surgical masks has doubled which ultimately raises the price of these goods up to twenty times. Vehicle sales in the US have declined by 40 percent; the automobile industry of Germany has closed its production in a few areas. Some of the major and well-known businesses like JCPenney, Nordstrom, Neiman Marcus, Kohl’s, Macy’s and Crew have filed for bankruptcy because of billions of loss due to COVID-19. Almost all the cultural events, conferences, festivals, fashion shows, exhibitions and events have been cancelled or postponed worldwide.

The production of TV programs has been delayed. Throughout the world, all cinemas have been closed resulting in loss of billion dollars to box office. All the major sports events like the Summer Olympics, which were to be conducted after March, are cancelled or postponed. The COVID-19 has obstructed the retail sector too. Shopping centers have reduced shopping hours. But this has also increased the trend of online shopping. Some retailers have introduced new concepts of retail to go where consumers book their order online and come to just pick up their orders. The effect of COVID on restaurants is even worse. In the start, all restaurants, fast food outlets were closed completely. Later, they were only allowed for takeaways and home delivery. Tourism industry is affected most by this pandemic as all the governments of all countries imposed bans on travel. All the domestic and international flights were cancelled and banned and tourist sites are closed by the government.

The aviation industry suffers the most because of travel bans. In the start, almost all the countries closed their borders and cancelled all the flights including domestic and international flights. When flights get operational after some time, it has to face limitations in the number of passengers. Sailings were cancelled by Cruise lines. According to the International Labor Organization, this epidemic has resulted in the loss of thirty million jobs which is far more than the job loss during the financial crisis of 2008. This figure includes 5 million people from China and 10 million Americans only.  Millions of refugees in India have lost work during lockdown. 44 percent of people have experienced job loss in Canada. Almost o.9 million individuals in Spain, four million in France and one million in the UK have lost their jobs.

Impact Of COVID-19 On Major Economies:

 The whole world is in danger of facing great health, financial and economic crises. Crucial, audacious, serious and immediate measures are required to save economies from crashing. The COVID-19 has become a global war. This disease is not only a health threat but also a serious threat to the economy. According to experts, the global economy can shrink to 1%. This will result in a steady drop in Foreign Direct Investment flow. If a recession occurs in most economies then according to an estimate the global annual growth will decline to 2.5%.

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  • China: The Outbreak of COVID_19 started in China, due to which Chinese economy suffered the most. The automobile industry of China bears 92 percent reduction in car sales. A loss of 74 billion US dollars rises in the wildlife trade industry. According to Chinese government, their economy is contracted by 6.8 percent as compared to previous year. For the first time in history, the Chinese government has not set any growth target for the economy. In China due to closure of schools, approximately 200 million students are affected. Some people in Wuhan have been cast away in their own country by hotels and their neighbors; some others have to face divisive quarantine measures.
  • Japan: Japan is considered as the third biggest economy in the world. According to BBC reports, the current economy of Japan is facing recession with 3.4 percent shrank in economy with the prediction of 22 percent shrank during the period of April and June. GDP falls by 3.4 percent and sales tax rises to 10 percent.
  • South Korea: The South Korean economy falls by 2.1 percent. The manufacturing and supply of automobiles is closed due to a shortage of supply of spare parts. Korean economy faces a trade deficit of $950 million as exports plunged 24.3 percent. Export of vehicles fell by 36.3 percent, petroleum fell 56.8 percent. Imports fell by 9.6 dollar billion.
  • India: Economists are expecting a great impact of COVID on Supply chains sectors of pharmaceuticals, fertilizers, textile and electronics. India is one of the major markets of China being most affected by COVID is also going to affect trade in India. The Indian government has put a restriction on the export of surgical equipment and ventilators. The stock market is in bad condition s BSE index is down by 2919 points and NIFTY is down by 950 points.
  • Pakistan: The sway of COVID-19 on Pakistan’s economy is devastating. Due to the poor condition of the health sector, carelessness in social protection eased in lockdown, economists predict that the country would face recession. The government is in a continuous struggle to avail COVID loans. Up to 19.1 million jobs are at risk, car sales decline by 75 percent, rupee depreciated, total public debt increased by 7.6 %.
  • France: The economy of France shrinks by 6 percent due to which the central bank of France confirmed the state of recession.
  • Germany: According to experts, the economy of Germany has contracted by 1.9 percent and a contraction 6.6 percent more is expected. Travel agencies, tour operators and hospitality industries are affected more.
  • Italy: Due to lockdown the GDP declines by 14%. Due to the increasing number of confirmed coronavirus cases the whole country was declared quarantine.
  • United Kingdom: The whole production competences of the company are affected by COVID-19. British airline Flybe was closed due to financial losses which resulted in 2000 jobs laid off.
  • Canada: The GDP of Canada falls by 11 %.  19 industrial sectors had waned. The Bank of Canada dropped the target of the overnight rate by fifty points to 0.75%.
  • United States: After the major outbreak the stock market of the US faces the greatest loss as Dow Jones Industrial Average fell 1190 points on Feb 27, 2020 and 25000 points on Feb 28, 2020. And in March Stock market of the USA fell by 7%.

Economy Recovery:

The recovery of the economy depends on the elimination or control over the virus. But it is almost difficult to guarantee as in countries like Switzerland, who imposed strict lockdown and gets complete control over pandemic news cases after lifting of lockdown and the reopening of businesses.

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It will take time for economies to come back to the points where they were before the pandemic. One of the most significant challenges for the government will be the increased number of unemployed individuals. For a certain period of time taxation will be the major issue as people will be unable to give taxes. Many businesses and individuals have already defaulted on loans and it is predicted that large corporations will default too. There are still many countries suffering from the effects of the 2008 crisis. It will be difficult to determine the length of time that COVID-19 will have on the world economy. One can easily imagine that this pandemic could have a similar effect as that of the 2008 crisis. More troublesome is the situation where some countries and people are still not serious about taking risk which may lead to spreading the coronavirus more and results in longer shutdowns.

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