The Effects of COVID-19 on the World Economy
Right now, every single country is wondering where the world economy will stand in the upcoming months. Families are worried about their loved ones, whether they will make it through the deadly COVID-19 or not. There are numerous possible outcomes of this novel virus that keep spreading further. How society and governments respond to the coronavirus will pave the way for the fluctuations in the world economy.
One cannot wipe off the image of recession, unemployment, and the rise of patients infected by the COVID-19. News is all about the spread of this virus and how things are getting worse day by day. The main focus is given to the rising number of patients, the global economic crisis, and the rapid decline in productivity. This global dynamic has given a new perspective to everyone –how the world can turn upside down within a matter of days. Keeping this in mind, let’s ponder upon the global side effects of the COVID-19 on the world economy.
The Global Impact:
In the past few weeks, the global economy went through several ups and downs. Due to the COVID-19, financial markets have been at the brink of collapse and industries are now super vulnerable. Since the industry of tourism and travel make up 10% of the total GDP worldwide, almost 50 million jobs can be lost easily. Small to medium enterprises are facing the consequences of the virus outbreak as well, with many people living at God’s mercy.
People who are paid well by their organizations cannot really relate much to the sufferings of SMEs employees. Many states have already announced relief packages for unemployed people, guaranteeing monthly wages to them. Regardless of the current plans in action, economic measures introduced by the governments are not suitable for everyone.
What about the Future?
Well, a fixed pattern can be noticed by various economists which are known as the ‘domino effect. Factors like financial markets, health systems, employment rates, and world trade getting close down have a significant impact on the economy. Due to the closure or slow growth of economic activities, everything else is getting affected one way or another. What the future holds for the human race is still unpredictable, causing fear across the globe. Economic markets are declining at an alarming rate, with a 20% decline recorded in the 52-week turnover. The S&P 500 index decreased over 7% within March, which later postponed trading worldwide. This ‘circuit breaker’ change recorded in the trading index happened for the very first time since the year 1997.
Interest rates have severely decreased, with a lower cost of borrowing in the U.S. government. This is something that will directly hit the liquidity position of the private companies, with little to no benefit to any of these profit-centered firms. The uncertainty of the world economy due to COVID-19 will keep rising, giving birth to deadly outcomes on a mass level. The relationship between the virus and the economy is a direct one. The longer this disease stays in the air, the more time it will take for the economy to get back on track.
By considering the economic viewpoint, we can deduce four future outcomes of this deadly disease:
• People will spiral into insanity over time.
• The state of capitalism will flourish.
• Society’s transformation into a place never seen before.
• The world’s reliance on socialism.
These outcomes may not have a high probability of succession, but relevant desirable outcomes can be expected.
From the Human Perspective:
So far we have learned how to tackle the COVID-19 outbreak, with less human interaction daily. By doing so, non-essential activities will be reduced, as humans now leave their houses only when necessary. Such a conscious measure will keep the virus intact and climate change will occur as well. The emission rate of greenhouse gases has decreased, further preventing the virus from spreading around the world.
In Wuhan, immediate lockdown and social distancing tactics were proven to be effective. Now, China is back in business, with rapid production taking place daily. Indeed, the pressure is building up globally, but we can learn from China and do the needed.
As of now, there is a serious threat of facing a recession in the future. This can only be tackled by efficiently decreasing the coronavirus cases globally. No doubt, every other business wants to generate higher rates of profits, but they are unable to do so in such a global crisis. As mentioned earlier, the domino effect will take place and people are already aware of it.
Moreover, it has been suggested in a recent study that lifting up lockdown in Wuhan too early will cause another COVID-19 crisis within the next months. Countries need to understand the deeper impact of this disease, training people to become resilient towards such pandemics. Before the COVID-19 outbreak, nobody was prepared for the worst-case scenario which severely affected the global economy. Besides the financial loss, there is an ongoing loss of precious lives that cannot go unnoticed.
What to do now?
Due to the frightening future ramifications of COVID-19, some essential plans will be needed to act upon.
• Firstly, health measures should be improved, with greater emphasis given to the safety of health professionals and patients.
• Local communities will be needing our support as well, with the financial backing of small enterprises.
• Sufficient allocation of funds to the Research department, with frequent updates from scientists working on finding a cure.
• Encouraging philanthropists to donate as much as possible.
• Making everyone prepared for the unexpected, just like the COVID-19 outbreak.
• Increasing the warehouses in countries, with higher distribution capacity to cover the underprivileged areas.
• Rigid policies about social distancing and closure of public places.
With so much going on, many countries are already trying to make amends to beat the pandemic. For instance, South Korea, Italy, and Japan announced effective fiscal measures to reclaim their position in the financial sector. On the other hand, the Bank of England and the European Central Bank will be updating their monetary policies as well. Through doing the necessary, the coronavirus will be easier to control, with adequate spending done to get back in the business.
Featured Image Credits: Pixabay