One Simple Idea That Explains Why the Economy Is in Great Danger
Covid-19 or more simply, the Coronavirus has become the most dangerous threat to the world’s health and economy. Covid-19 is a highly contagious and deadly type of flue, and the scariest part is, there is no vaccine or effective treatment currently available for this micro monster. The standard antibiotic or anti-viral medicines are not effective on this health threat as well as the existing flue medicines. The increasing number of Corona affected patients across the globe has made the WHO impose health emergency around the world.
Along with being a pandemic and playing havoc with public health, the Corona outbreak has posed severe threats to the global economy. Let’s have a brief idea of where the world economy is standing right now, why it reached there, and what is most likely to happen in the future.
Reasons for Global Economic Slowdown after Corona Outbreak
With the increasing number of Corona cases, most of the countries are locking down their international borders. There is the fear of unlimited lockdown around the world that is pushing people to store groceries and utilities. They are trying to store as much as possible to survive any immediate lockdown without any suffering.
But this panic shopping is resulting in price hike and unavailability of certain items from markets. The extreme shortage of toilet paper, hand sanitizer, and masks are examples of these unexpected results.
Low Economic activity and Manufacturing Slowdown
With workers staying home, most of the manufacturing units are producing no or very fewer items. Although the official work is possible from home, the case is different when it comes to the production phase. No labourers or workforce is ready to go to work by choice or as per the local isolation orders.
Finding raw materials and maintaining supply chains has also become a significant concern in the manufacturing sector. Hyundai, the leading Korean car manufacturer, has stopped its production unit because of the non-availability of supplies.
On the other hand, people are buying as much food and household items as possible. This low production has created a massive difference between demand and supply in the market. Consequently, the market situation is gone unpredictable.
Most of the countries across the globe are imposing city-wide or country-wide lockdown as a strategy to minimize the number of Corona patients. This initiative is effective as Corona is a highly contagious disease. The daily-wage workers are suffering the most since they cannot find any work to earn bread and butter.
Similarly, the entertainment sector, including parks, playgrounds, stadiums, gaming zones, cinemas, and other recreational businesses are shut down in many countries to prevent this contagion. As a result, the entertainment industry is halted, and there is very less or zero economic activity going on in this sector.
The worst Sufferers
China, being the center of this deadly disease, became the first and the worst victim of an economic slowdown. Soon after, China, Iran, Italy, and Spain also joined the club. These countries had to spend vast amounts of money on the procurement of the necessary equipment to fight this unexpected disaster. Moreover, building the required infrastructure, including hospitals, isolation wards, and quarantine camps, also required funds. Since the Corona outbreak is a natural disaster, there were no proactive measures taken by any country. Managing all the diagnostic, preventive, and treatment processes has put an enormous burden on the economies of these countries.
The estimation of non-performing loans is expected to reach up to $1 trillion in China. China ranks among the top exporters in the world and supplies almost 30 % of electronics across the globe. The slowdown of the economy after the Corona breakdown will affect the world economy in many aspects.
It is being said that the after-effects of Corona on the world economy will be more drastic than the global financial crisis back in 2008. US stock market has fallen 9% on 16th March and its crashing down since then. The UN trade agency has already warned the world about an estimated 2% slowdown in the global economy.
This decline in the manufacturing field will lead to 30% less demand for oil and gas during the coming business year since lesser fuel will be required due to a slowdown in trade activity. Additionally, this scenario is likely to create a severe imbalance in the import sector also. Due to less demand, there will be lesser imports, and unfortunately, China is listed among the top raw material importers as well.
Hotel and Tourism Industry
With a large number of countries imposing lockdown, travelling and tourism have become almost impossible. Moreover, people don’t want to take any risk with unnecessary socializing. Together, all these factors have caused a drastic slowdown in tourism and, consequently, the hotel and hospitality industry.
People are no more dining out, and fast-food restaurants, food corners, along with restaurants, are also going through a significant business slowdown. Even home delivery of food has decreased as per the current statistics due to the fear of catching this virus. People have isolated themselves, and no social gatherings are taking place. This leads the entire event management, decorators, caterers, music organizers, and many other trades towards a halt.
These unfavourable indicators are not limited to the hospitality sector only but have impacted the other related industries also. The airline business around the globe is expected to lose $29 billion this year after Corona breaks out. So, this situation is multi-dimensional, affecting every aspect of the global economy.
In short, the Corona outbreak has already put the global economy on a significant downfall. There are more negative trends in the business and trade sector globally. The Chinese economy is not alone to suffer this critical situation. Still, airline, manufacturing, hospitality, export, and many other areas of business and trade are going to be affected due to this natural disaster. However, with the combined efforts of world financial agencies and countries, the situation can be improved by minimizing the negative impacts of the Corona outbreak on the world economy.