Covid-19 Pandemic Impact On The Global Economy

Ongoing coronavirus pandemic is very first, a human calamity that has affected hundreds of thousands of people worldwide. Apart from this, COVID-19 pandemic impact on the global economy needs special attention. In this article, we will have a look at how the novel strain of coronavirus has affected businesses, sectors, and industries across the globe. COVID-19, which first emerged in Wuhan, China, is rapidly spreading across various countries, including Iran, Iraq, Italy, and the U.S. So some figures mentioned in the article may vary as time passes.

Having massively overlooked coronavirus has entered international financial markets. In the last few weeks, the virus has started spreading across the Middle East and Europe. So far, the coronavirus threat has priced so violently across several asset classes. As a result, experts fear, eventually, the pandemic may lead to a recession in the world economy. Even more, the situation is raising concerns amid businesses whether the market decline actually indicates recession. Well, in reality, it is difficult to project anything, and indices may fail to answer such questions.

In March, the WHO declared coronavirus or SARS-CoV-2 as a pandemic. The virus has almost disrupted the daily lives of people worldwide, starting from school to offices and businesses. At the time of writing this article, there were more than 465,900 confirmed cases of coronavirus across the world. Even more, over 21,000 people have died due to the illness. Elderly, children, and people having low immunity are particularly vulnerable at the disease. So far, 199 countries have reported instances of COVID-19. Besides, it is soaring remarkably in Italy, the number of cases is approximately doubling every couple of days.

Covid-19 Pandemic Impact On Global Economy

COVID-19 impact on the global economy through three ways – finance, production, and product supply chain. Let’s see the aspects mentioned above one by one.

• Finance:

COVID-19 could impose a financial impact on companies and fiscal markets. Provisional interruptions of efforts and manufacturing might influence some companies, remarkably those with insufficient liquidity. For now, it is difficult for traders to anticipate which firms are at risk. As a result, the increasing risk might show that one or many leading market players have taken capital standpoints that are unproductive under current circumstances. It also further results in declining trust in financial markets and instruments.

Apart from this, there are slight probability that the event would become a notable financial market disruption as contributors have feared regarding default risk. A fairly more likely possibility is a crucial fall in corporate market alliances and equity markets. At the same time, investors may prefer to embrace federal securities due to the insecurity created by the outbreak.

• Production:

Note that the novel coronavirus has affected the production of various products. It has already and substantially altered the manufacturing process in China due to the closure in Hubei province and other regions. Apart from this, some other nations have started experiencing a direct impact as their officials have ordered lockdown and other similar steps. So far, the halt in China has had an impact on exporters to the country. Japan, Korea, and some Asian countries are some of the largest suppliers in China. All in all, during coronavirus pandemic, various nations will probably experience slacken growth in the current year.

• Product Supply Chain:

Many production companies depend on imported transitional inputs from China and other regions affected by//COVID-19. Many businesses also depend on sales and trades in China to achieve financial goals. So the decline in commercial activity and government-imposed transportation restrictions in affected nations will probably have a massive impact on the manufacturing process. Even more, it will affect the productivity of some specific international companies, notably in production and in raw materials essential for the manufacturing process. Most importantly, small-scale and medium-sized businesses may experience greater difficulty in living the interruption. Above all, firms linked to the travel and tourism industry are suffering losses that are probably impossible to cover in the future.

So these are the three significant means through which coronavirus is or may affect the global economy. Along with that following are some of the widespread sectors which are experiencing a dive.

• Automobile Industry:

COVID-19 has battered internal auto sales as well as credit quality in the current year. As per experts, global sales may plunge by around 15% this year, and the production process will also decline. Analysts believe global automakers and providers will experience extreme credit pressures.

• Consumer Products:

Customers of Chinese products both in their home nation and amid their overseas voyages are the leading customer segment for the personal luxury products industry. Notably, the sector accounts for more than 30% of the global market. Analysts estimate that Europe-rated luxury product businesses have some margin of safety under current ratings. Even more, they may sustain an adequate hit to their revenues that will rely on how fast the virus can be controlled. Notably, if nations worldwide fail to contain the virus, disruption for companies could stretch into the second half of 2020.

• Airlines and Aviation:

Currently, the global airlines industry has experienced a massive fall in business because of the ongoing coronavirus pandemic. It has also posed severe challenges to the industry and has threatened the credit quality of operators. The eventual impact of the pandemic on the global airlines industry relies on the period of the severity of the calamity. For now, many countries have sealed their borders, including the U.S. and India. So, the global airlines industry may experience a plunge until the virus continues to spread at a higher pace.

• Corporate World:

COVID-19 will weigh up massively on the global economy. It will also pass through the pricing and demand for goods and services in the country. Even more, the sectors exposed to travel and tourism will have the burnt of the primary impact. So far, many companies have already noted the probable spin-off from COVID-19 on their businesses.

• Default, Evolution, and Retrieval:

Analysts say the global recession would probably push the failure rate of the U.S. to 10%. Financial market disturbance regarding coronavirus pandemic is stressing funding circumstances while profits for some sectors are estimated to plunge under the stress of supply interruptions and pooling demand. Meanwhile, the oil and gas sector is probable to get a mostly hard hit during the pandemic. So far, oil prices have dived as low as $30 per barrel and increasing supply resulting in the deadlock between Russia and Saudi Arabia. Well, a fast resolution between the two sides may not happen soon or ever.

• Healthcare and Pharmaceuticals Industry:

Researchers hope some pharmaceutical companies gain, and others might experience adequate gales. But, they do not expect a lot of rating actions due to SARS-CoV-2. Meanwhile, the drugmakers whose products prove efficiency against COVID-19 would gain financial benefits. Even more, businesses and companies worldwide may pour some money in pandemic avoidance to assist the industry in the upcoming time.

Still, there are many probable short-term flaws like an adequate risk from interruptions to the worldwide supply chain for active API (Active Pharmaceutical Ingredients). The condition is transforming quickly, and the more extensive and longer the epidemic, the greater possibility of more adverse rating actions. On the other hand, insurers and hospitals are the most vulnerable to the risk. Both will massively be reliant on harshness, duration, and impacts to operations for healthcare facilities. Whereas, medical equipment, pharmaceuticals, and life sciences companies have unpredictable degrees of credit coverage with more balance to adverse risks.

• Media and Telecom Sector:

As per analysts, the U.S. telecommunication and cable providers can sustain the effects of a rise in coronavirus cases along with a dropping share market with restricted influence to credit quality short-term. On the other side, durable credit consequences will rely on the duration and severity of coronavirus pandemic and its impact on the global economy.

• Restaurant Industry:

Ongoing coronavirus pandemic has dramatically raised the risk for the previously strained restaurant sector. As per the WHO, social distancing is the best option to contain the spread of coronavirus. Thus several governments have recommended people to avoid gathering socially or visit places having crowds. Besides, in an effort to assist people in maintaining the social distance, various restaurant chains, including coffee chains like Starbucks, have shuttered their outlets. Some of the food chains are helping people by offering take away facilities. So the restaurant industry may experience a moderate or severe plummet during the pandemic.

• Sports Industry:

On account of the COVID-19 pandemic, various nations and agencies have canceled Olympics, sports events, matches, leagues, etc. Even cricket matches have been canceled in some countries due to fears of spreading the virus. But these cancellations have severely affected the investors and sponsors who have poured money in those events.

Last Few Words:

Let’s hope that coronavirus will go away soon and minimally affect the lives of people worldwide. In the end, what’s still trending in the market is daily need items like pet food, toilet paper, food, vegetables, and much more.

 

Author Bio: Sonal Patil is a Research Analyst at a market research report providing a firm in the industry. She is passionate to analyze and work on market data which helps marketers for strategy Planning. Besides this you will find me reading, traveling and experimenting with new things.