Coronavirus Impact on Economy COVID 19
The Coronavirus emerged initially in china. Gradually the entire world was contaminated by Coronavirus. The government, on the advice of health officials and other experts, prescribed measures to prevent the spread of the virus. The preventive measures included-wearing a mask, washing hands regularly, and social distancing. This contagious disease had also led the government to take some rigorous actions. It included shutting down- educational institutions, shops, crowded markets, malls, offices, and even the corporate markets were shut. Certain measures were also taken to restrict mobility. The preventive measures have adversely affected the economy of the globe. Believe it or not, but the world is heading towards an economic recession. According to the IMF, the global economy is expected to shrink by over 3 percent in 2020. one may note that this is the steepest slowdown since the Great Depression of the 1930s.
Coronavirus Affected Sectors
Many Indian regions affected by the coronavirus Lockdown need immediate relief; A large proportion of serious job losses are reported.
- Employment sector
- International Trade, domestic trade
- International tourism, domestic tourism
- Major decline in household purchases decline in demand for targeted
- Production and manufacturing industries have also been globally hit by the pernicious This has led to a fall in external demand.
- Oil and natural gas-As most people are confined within the four walls of their house, the oil and natural gas industry has also been affected. Oil prices fell in March. This was because the transportation section, which accounts for 60 percent of the oil demand, was hit due to lockdown. Moreover, in China, the demand for natural gas had declined to a great
- Industrial Metals:- Different countries like China, the US, Europe, and others faced problems as the demand for industrial metal drastically reduced because of the pandemic. According to- IMF, China accounts for roughly half of the global demand for industrial metals
- Food and beverages:- IMF has highlighted a decrease in food prices by 2.6 percent in 2020. The fall occur-ed because of supply chain disruptions, border delays, food security concerns in regions affected by Covid-19. In the lockdown period, the price of tomatoes, potatoes, cereals, oranges, seafood, and arabica coffee has increased. On the other side prices of tea, meat, wool, and cotton have declined.
- Labor-intensive sector:- This sector has also suffered a major set back. The labor ended up jobless, hopeless, and helpless amid the coronavirus.
- Transport sector- Air, water, and road transport are left abandoned as a step to stop the spread of Virus.
- Agricultural sector- Although it is one of the rare sectors that have been not been affected by the COVID-19. However, the virus has increased Pressure in the agriculture sector because there is very less labor that is willing to work amid COVID-19.
As has been pointed out earlier, the virus has dragged the global economy into a bog of recession. This simply means that when the economy starts shrinking and growth will stop. Look at the following two graphs to get an overview of the situation.
Coronavirus (COVID-19) and global growth are very closely related. The pandemic has inundated the entire world. However, one may note that different countries will bear the pain differently. The current economic crises are worse than the 2009 global financial crisis. Global GDP is expected to decline by 2.1% while developing
countries’ GDP is expected to decline by 2.5% and high-income countries by 1.9%
Let us now see in detail how different countries have been hit by COVID-19
Coronavirus in the United States
The people of the US found themselves helpless amid the pandemic. Therefore, about 20.5 million people in April registered themselves as unemployed to take unemployment benefits from the government. These figures are obviously expected to rise in the coming months. Not only the so-called ordinary class but also the labor class has suffered because of COVID 19. Reuters report has highlighted that since March 21, more than 36 million have filed for unemployment benefits. The BBC News has also reported that- Leisure and hospitality were hit especially hard, with payrolls falling by 7.7 million or 47%. Employers in education and health services cut 2.5 million positions, while retailers shed 2.1 million.
Canada in may report that- its unemployment rate had increased
5.2 percentage points to 13% last month. Canada estimated that about a third of the workforce was either out of work or working less than half of their usual hours.
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Coronavirus in India
India’s economy has shown a fair graph since 1979. However, the last four months have ruined the earlier economic graph drastically. The estimates by the economic experts hint towards a darker future that India would encounter. The lack of effective policies and the non-timely implementation of those policies may worsen the situation. For a developing country like India, the loss of four months’ income would leave nearly half of the country’s population in poverty. Even after the virus is tamed it would take a strong will to revive the lost economy.
It is unfortunate to note that India was in a vulnerable state when
the pandemic engulfed the country. It means that the Indian economy was under imbalance even before the pandemic hit India. Reports highlight the fact that in the financial year ending in March, GDP only grew at 4.2%. GDP growth fell from 7% growth shrunk to 6.2%, then to 5.6%, 5.7%, 4.4%, and finally 3.1% in the quarter that ended with the lockdown.
Furthermore, the World Bank released its Global Economic Prospects report. It has been expected that India’s gross domestic product (GDP) will contract by 3.2% in 2020-21. It is also anticipated that there will be a moderate recovery to 3.1% growth in 2021-22. This means that 2021-22 GDP will be less than what it was in 2019-20.
One of the sectors that are worse hit by the contagious disease is the MSME sector.
We are all aware that Micro, small, and medium enterprises are too tiny to bear the loss that COVID 19 would incur in the future. These enterprises were never designed to fight with such an economic crisis.
The problem worsens because these enterprises are expected to pay their employees even when these companies are literally shut. The pain of taxes, loans, and other expenses are not exempted.
Thus it becomes yet another hurdle that hinders the scope of functioning of these enterprises. Statistics show that MSMEs employ up to 110 million people. Paying these people for the long term does not seem like a feasible idea.
Media reports say that MSME representatives have appealed to the government for concrete action. This includes tax concessions, easy access to credit, GST write-offs, and reimbursement or concession for wage-guarantee.
Corona Virus in China
Chinese GDP is expected to reduce by 3.7%. China comes in the top list of exporting countries. However, because of the COVID-19, the export-import has been adversely hit. China sees a contraction in exports of 3.7%Furthermore, the competitiveness of Chinese production has declined due to higher costs of exporting and
higher costs of inputs. additional inputs are needed to bring goods to their consumers, instead of being available for
consumption and investment in Coronavirus
The final product produced is so costly that most people are reluctant to spend money on buying these products. Therefore, the scope of making profits from other countries has reduced drastically.
China’s tourism has also led to a decline in GDP. Furthermore, banning of 59 Chinese apps by the Indian government in India has worsened the situation for China. The digital market would be severely affected by such an action by the Indian government.
Corona Virus in Germany
The country is majorly dependent on manufacturing cars and other industrial goods. However, this is a period when manufacturing industries are completely shut which in turn affects the economy of the country.
Corona Virus in Mexico
Mexico is known for its business industries. Mexico’s economy contracted 0.2 percent at the start of the year and is declining further each day.
Corona Virus in Russia
We all are well aware of the fact Russia has struggled since 2014 as oil prices fell. Furthermore, other nations put sanctions on Russia because of its military actions in Ukraine. Hence, COVID-19 contributed nothing but a further decline in the economy. Experts fear that by the end of the year Russia can face a drastic recession.
Corona Virus in Other countries-
Cambodia (3.2 %), Singapore (2.1 %), Hong Kong SAR, China (2.3
%), Thailand (3 %), Vietnam (2.7 %), and Malaysia (2.1 %) are expected to suffer a major set back because of their direct involvement in the economy through trade and tourism.
Vietnam sees a decline in its total exports by only 1% because it benefits to an extent from the gap left by the decrease in Chinese exports. Some countries in East Asia and the Pacific region are the most affected in terms of export declines, with HongKong
SAR, China, suffering the biggest losses (5.2%), followed by the Lao People’s Democratic Republic(3.6%), Cambodia(3.9%) and Singapore(4.4%). Selected countries see an increased demand for their tourism exports due to a diversion of tourism from the EAP region, with some flows increasing by 2%-3% between countries outside the EAP region, but in all countries total tourism flows decline across the board, with exports from the EAP region declining by about 30%. This small bilateral tourism export gains disappear, as the shock spreads from China and East Asia to other parts of the world.
Cambodia and Thailand are expected to record GD Plosses of over 6%, while Singapore; HongKong SAR, China; Taiwan, China; the Republic of Korea; Malaysia and the Philippines see losses of over 4.5%, which are also of higher magnitude than in China.
High-income countries could see significant losses of GDP, with the estimated loss in the European-7- Union over 3.4%, Japan– 4.6%, the United States–3.4%, and Canada–3.2%. Countries in Sub-Saharan Africa (SSA) and the Middle East and North Africa (MENA) are the least affected, and under the global and amplified global pandemic scenarios, the estimated loss of GDP is estimated to be around 3%. [as has been pointed out by Maryla Maliszewska, Aaditya Mattoo, and Dominique van der Mensbrugghe in their preliminary assessment report]
The government needs to formulate effective policies that can mitigate the loss. Furthermore, effective implementation and corporation of citizens of a country is a must requisite. One may not forget that Japan could revive its economy even after facing a catastrophic war-I.e World WarII. Hence if the mind is set right nothing is impossible.