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A Comprehensive look into How the Coronavirus Pandemic Thrashed the Economy Worldwide

A Comprehensive look into How the Coronavirus Pandemic Thrashed the Economy Worldwide

With the emergence of the coronavirus last year in the Chinese city of Wuhan, it engulfed no less than 185 countries and territories infecting over 2.7 million people and claiming 190,000 lives all over the world. To contain the rampant spread of the virus, governing bodies all across the globe enforced measures to lock down cities and countries at different levels which include closing down of workplaces, shutting down schools, shops, sealing borders, and limited public gathering. These restrictions which currently are the only antidote for the prevailing crisis, however, abruptly suspended all the economic activity, damaging businesses and forced people to become jobless.

No country in the world has managed to escape this crisis and already suffering a great deal owing to the great lockdown. Given below is the information as to how different sectors have been affected resulting in a huge global economic loss:

Unemployment Growth

On the basis of the estimation of several economists, it has been inferred that due to lockdown measures all around the world, many people are likely to lose their jobs. The effect is very much evident with the current statistics where already unemployment rate has started to increase in several stronger economies:

·       China- 5.9%

·       Australia- 5.2%

·       Germany – 5.0%

·       U.S- 4.4%

·       South Korea- 3.8%

In the United States which is the largest economy in the world, over 26 million people have already lost their jobs in the span of the last five weeks. Since August 2017, this has been the highest. Even countries such as South Korea and Australia exhibit a shocking rise in the unemployment rate, and it is even possible that the situation will get worse.

Solid blow to Services Industry 

The services industry plays an indispensable role in contributing to growth and employment in several countries, including even the largest economies and consumer markets such as China and the United States. As COVID-19 spreads, the tumble in retail sales of China and the U.S. sets in with 15.8% and 6.2% respectively. Both countries projected a steep decline in retail sales as many stores were compelled to shut down and kept the consumers at bay due to strict lockdown measures. Even the massive online stores failed to make the situation any better.

Economists also reported that consumers most likely would not be able to recommence spending even after the end of lockdown as was seen in the case of China because of a slow increase in retail sales after numerous businesses’ operations restarted.

There would also be a very sluggish improvement in household spending even after the restrictions are reduced or even completely removed as consumers will refrain from purchasing things at shops. A massive blow in the services industry has been registered globally, with businesses involved in real estate, transportation, and travel and tourism sectors undergoing some of the steepest falls in the activity by far.

The Collapse of Manufacturing Activity

Manufacturers already suffering from the last two years due to the U.S.-China trade war, are again experiencing thrust as coronavirus is dispersing around the world. The COVID-19 pandemic initially impacted manufacturers working outside China that depend upon giant Chinese factories for parts and materials usually called intermediated goods to build their own goods and products. But factories of China adjourned their operations much longer than expected as the measures were implemented to contain the virus.

As more and more countries are resorting to lockdown, more and more number of manufacturing firms are struck. Some have been forced to shut down temporarily, whereas the ones that somehow remain open are facing constraints in receiving their supply of intermediate goods and materials. The industrial production in the U.S declined by 5.5% and in China, it fell by 1.1%. Moreover, a decrease in demand for goods aggravated the difficulties that manufacturers were going through, consequently decline in output generation by the factories across the U.S., Europe, and Asia.

The unfavorable year for Trade Continues 

Trade worldwide, which was already stagnant in 2019, is estimated to get worse this year. The expected fall in global merchandise trade is as under:

·       North America exports in pessimistic scenario: - 40%; in optimistic scenario: - 15%

·       Europe exports in pessimistic scenario: - 35%; in optimistic scenario: - 12%

·       Asia exports in the pessimistic scenario: - 32%; in an optimistic scenario 10%

The World Trade Organization, in the recent forecast, asserted that the trade volume could plunge by 12.9% or 31.9% this year based on the course of the global economy. Regardless of the scenario, all regions will encounter export and import decline in double digits.

Conclusion 

The intensity with which the coronavirus pandemic has hit the economic activity has led numerous institutions to cut down their forecasts for the global economy. On the basis of the evaluation done by the International Monetary Fund, a minimum of a 3% fall is expected in the global economy. Only a few countries such as India and China are expected to see some growth in 2020.

The aggregate loss to global GDP in 2020 and 2021 due to the coronavirus crisis could reach 9 trillion dollars, more than the combined economies of Germany and Japan.