As the cases and deaths by coronavirus rise with every passing day, the global economy continues to suffer. We are half-way through 2020 and up till now, over 12,393,656 people all around the world have contracted this deadly disease. While 188 countries fight for health, the effects of coronavirus on the economies are worse than predicted. From the biggest shift in stock markets to the unbelievable decrease in the prices of crude oil, Covid-19 has impacted both lower and upper-middle countries and their economies.
The pandemic is now being acknowledged as the biggest economic shock of the 21st century, with no chances to recover fast. The highly contagious disease has pushed the world towards a crisis severe than the great depression.
According to the IMF’s managing director, many countries worldwide would experience negative per capita income growth this year. Even with a chance of partial recovery in 2021, these countries would require billions of dollars in foreign aid.
According to research, around 86% of the companies will declare bankruptcy. There also is a 76% chance for the prices of goods to rise after the pandemic ends. In the US, 81% of the world’s workforce has had their offices closed and only 47% of the people have enough financial resources to survive the next three months. Based on these facts, the IMF states that this would be the worst economic fallout since the Great Depression.
Worst Economic Downturn Since Great Depression
Covid-19 is a crisis like no other. The world’s greatest powers can be seen trying to cope with health as well as financial crises without a proper strategy. Despite the extraordinary efforts of governments, the Global GDP in 2020 has contracted by 5.2 percent.
Coronavirus Pandemic has triggered deep recessions which are expected to leave permanent marks on the world’s economy. This would be the result of lower investments and reduced global trade. The loss of human capital due to unemployment would also have a greater impact on the individual lifestyle. The global economic growth would be ‘’sharply negative’’ this year according to the estimates of the IMF.
Let’s take a look at the damage coronavirus has caused on the world’s biggest economies.
The United States is the new epicenter of coronavirus, now approaching 650,000 infections. The unprecedented toll pandemic has had on the economy is something the US still has to deal with. In the past 4 weeks, 22 million Americans have filed for unemployment benefits. Millions of Americans haven’t yet received their stimulus cheques because of the technical glitches.
According to the official figures, the US economy sank at an annual rate of 4.8%. The coronavirus has affected every aspect of the business including the production continuity, customer demand, and supply chain stability
According to the IMF, the proportion of people out of work in the US hits 10.4%. This signals an end to a decade of expansion for the largest economy in the world.
Covid-19, originated in China, has brought the world’s second-largest economy to a standstill. Almost 83,594 people in China have been affected by the deadly virus out of which 4,634 people died. The Gross Domestic Product (GDP) fell by 6.9% in January- March. The economy of China shrank for the first time after 1992.
The urban employment rate in China was recorded at 6.2% in February. Such a high unemployment level affects private spending and investment. In March, the retail sales of China fell by 15.8%. Pandemic has also affected the fixed asset investment rate which shrank by 16.1%. In 2020, China will experience the lowest economic growth in nearly half a century. This would also push the budget deficit to a record high.
With over 289K confirmed cases and around 45K deaths, the economy of the United kingdom is likely to be the hardest hit by the coronavirus among the other major economies. The Organization for Economic Co-operation and Development has warned that the economy of the United Kingdom might fall by 11.5% in 2020. The economy could contract by 14% if there was a second peak in the pandemic.
The lockdown restrictions by the government have badly affected the service-based economy. This sector includes financial services, hospitality, and tourism and makes 3 quarters of the UK’s GDP. The crisis will cast a long shadow over the economy
The New Normal – The Recovery Phase
According to experts, living with the coronavirus is the new norm. The long term effects of coronavirus are still largely unknown but we do know that it is going to change the world completely. The open economies that use lots of inputs from the other countries are suffering more than the others. This is due to the effect of coronavirus on the supply and demand of products.
Most of the countries that export products to the demanding countries on a large scale would take longer to recover. These countries include Ireland, Luxembourg, Singapore, and Vietnam. Due to COVID-19, Germany is suffering the most from the weaker foreign demand. The fallout of foreign supplies has also affected the economy of Canada.
The length of the recession determines how long it will take to recover from it. The key factor in determining the recovery time is the degree to which people are willing to get out and continue their daily life activities while maintaining social distance.
Full economic recovery from coronavirus is a tough standard. With the virus still out there, the recovery is only possible if the infection can be reduced. All of us would have to adopt a new way of living, working, and forging relationships. The governments would also have to move towards smart policies and new incentives to encourage investment and activities at pre-pandemic levels.