Coronavirus economy impact
The Coronavirus outbreak, which was originated in China, has infected near about 2 lakhs of people. Its spread has left the businesses growth around the world counting costs.
As the world struggled with the coronavirus, the economic impact is gradually increasing – with the OECD warning. The virus enhances the biggest danger to the global economy since the 2008 financial crisis.
UNCTAD, the UN trade agency, warned of a dropdown of global growth to under 2% this year, effectively removing $1 trillion off the value of the world economy.
A poll of economists by the London School of Economics found 51% believed the world faces a major declination. Even if COVID-19 kills no much more people than seasonal flu. Only 5% said they did not think it would.
Business deals are done with lost revenue and disrupted supply chains. Weeks after China enabled travel restrictions on millions of its people. Italy laid preventive measures on its entire population, with France and Spain imposing similar measures and many other European countries banning movement and business activity. On 11 March, some industries in Wuhan were said to shut down, a day after Chinese President Xi Jinping visited the city for the first time since the outbreak began.
Global shares take a hit
In stock markets, where shares in companies are purchased and then sold, might affect many investments in pensions or individual savings accounts (ISAs).
The FTSE, Dow Jones Industrial Average and Nikkei had seen a drop-down since the outbreak began on 31 December.
China is one of the world’s second-biggest economy and a leading trading nation. So, economic fallout from COVID-19 also declines global growth.
Economists polled by Reuters on March 3-5 announced that the outbreak likely halved China’s economic growth compared with the previous three months.
The economists, based in mainland China, reported growth to fall to a median of 3.5% this quarter from 6.0% in the fourth quarter of 2019.
The Chinese economy is more probably to be hit further by decreased global demand for its products due to the effect of the outbreak on economies around the world.
Data reported on 16 March displayed China’s factory production plunged at the sharpest pace in three decades in the first two months of the year.
Government policies would be more focused on preventing large-scale bankruptcies and unemployment.
The Dow and the FTSE have reported biggest one-day declines since 1987.
Investors frightened of the coronavirus will threaten economic growth and that government action may not be enough to stop the spread.
Central banks globally have cut interest rates.
To overcome the economic fallout, the US Federal Reserve on 15 March declared the interest rate would be zero.
But the move, coordinated with central banks in Japan, Australia and New Zealand in a joint-adventure not seen since the 2008 financial crisis, failed to shore up global investor sentiment.
This leads to making borrowing cheaper and inspires spending to boost the economy.
The US Federal Reserve and the Bank of England are among those to decrease the interest rates.
Travel among the hardest hit
The travel industry has been badly affected, with airlines cutting flights and tourists cancelling their business trips and holidays.
Governments around the world have initiated travel restrictions to control the spread of the virus.
The EU is restricting travellers from outside the bloc for a period of 30 days to seal its borders to prevent the coronavirus crisis.
In the US, the Trump administration has banned air traffic to and from Europe.
Data period up to 8 March displays international flights booked from the US were behind by 37% compared with the same period in 2019.
There were more than 415,000 visits from China to the UK in the 12 months to September. Chinese travellers also spend more on an average visit to the UK at £1,680 each.
On 5 March – before the US travel restriction was declared – the International Air Transport Association (IATA) expected the COVID-19 outbreak could cost airlines $113 billion lost revenue.
There are lots of airlines that have got relatively less profit and lots of debt and this could send some into a very difficult situation.
On March 16, British Airways declared that it would cut flying capacity by at least 75% in April and May. Other UK airlines, including Virgin Atlantic and easyJet, also declared drastic cuts.
Customers buying less
Government suggestions to stay at home due to Coronavirus is also having a gradual impact on the business of hotels and restaurants.
Factories in China slowed down
In China, where the coronavirus first emerged, industrial production, sales and investment all declined in the first two months of the year, compared with the same period in 2019.
China is the world’s largest exporter of goods, and the third-largest contributions in manufacturing work.
Nasa declared pollution-monitoring satellites had noted a significant drop in nitrogen dioxide over the country.
Restrictions have gradually affected the supply chains of big companies including industrial equipment manufacturer JCB and carmaker Nissan.
Shops and car dealerships have a fall in demand.
Chinese car sales, for example, declined by 92% during the first half of February. More carmakers, like Tesla or Geely, are now selling cars online as customers stay far away from showrooms.
Even ‘safer’ investments hit
When a crisis hits, investors often do less risky investments.
Gold is traditionally declared a “safe haven” for investment in times of unpredictability.
Until March, the price of gold raised. But now, with investors increasingly fearful about a global declining, even the price of gold has decreased.
Oil at its lowest price
Investors are afraid of the worldwide spread of the virus will further affect the global economy and demand for oil.
China is one of the world’s largest oil importer. The International Energy Agency (IEA) expected the first drop in worldwide oil demand in a decade.
Our 2020 worldwide oil demand forecast is cut by 1.1 MB/d.
On 9 March, oil prices lost as much as a third of their value – the biggest drop down since the 1991 Gulf War, as Saudi Arabia and Russia.
Bitcoin lost more than 30% of its value in March, Reuters reported, outpacing losses for stocks and oil.
Coronavirus has drastically changed the price down further.
Growth could stagnate
If the economy is growing rapidly, that generally states more wealth and more new jobs.
It’s calculated by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year.
The world’s economy could grow at its slowest rate due to the coronavirus outbreak, according to the Organisation for Economic Cooperation and Development (OECD).
The forecast growth of just 2.4% in 2020, down from 2.9% in November.
Disruption to commerce
The lack of products and parts from China is affecting companies around the world. As factories remaining closed after the Lunar New Year and workers stayed home to prevent the spread of the virus.
Apple’s manufacturing partner in China, Foxconn, is struggling with the problems of a production delay. Some carmakers including Nissan and Hyundai temporarily remain closed.
The pharmaceutical industry is also facing disruption to global production.
Many trade shows, cultural and sporting events across the world have been postponed until further notice will come.
The travel and tourism industries will affect economic disruption.
The UN’s International Civil Aviation Organization (ICAO) predicts that Japan could lose $1.29 billion of tourism revenue in the first quarter. Due to the less number of Chinese travellers, while Thailand could lose $1.15 billion.
Will Corona Virus outbreak paralyze the Global Economy?
The first outbreak of infections was reported to the World Health Organization’s China office on the last day of 2019. The international agency then announced a global emergency a month later. The rare designation enables it to mobilize financial and political support to contain the virus spread. Less than 2 months, it was first reported. The virus had infected more than 1.5 lakh people worldwide and killed more than 5000 people. So what happens when a completely foreseen event shocks the world second-largest economy?
China accounts for almost ⅕ to of the global GDP. Naturally, there is growing concerns over coronavirus impact on the global economy.
China has set a target of 6 per cent GDP growth target for 2020, but the coronavirus will make it difficult to reach the target.
The virus is expected to have a bigger impact than the SARs outbreak in 2003 who killed more than 800 people worldwide and saved almost one per cent of China’s growth.
The coronavirus outbreak will be sharper and deeper than SARs. China’s economy has grown 4 times bigger since then, making up almost 18 per cent of the global economy.
And it’s not just China’s problem.
China has developed faster than any major economy to reach the world’s second-biggest by GDP.
And as China is the most important part of a range of global supply chains. The outbreak will effect worldwide.
Qualcomm, the world’s biggest smartphone chip maker, announced that the outbreak impact will cause significant unpredictability over demand for smartphones.
The travel and tourism industry is also affected.
Nearly 6 million people from China visited South Korea last year but data shows that the country could lose a number of those tourists.
Singapore’s trade ministry also cut its GDP forecast for this year due to the outbreak.
But with the major businesses across China gradually postponing their operation, some rely on a V-shaped impact like the SARs crisis.
“Major businesses and factories across China suspended their operations as per the rules under the Chinese Government systematic economic.”
Most importantly the spread of the virus needs to stop.
And with certainties over the situation in China, G20 finance ministers and central bankers will gather in Saudi Arabia to discuss the possible outbreak.
Important Questions to discuss
1.When will this epidemic end?
No, one knows about the end period. President Donald Trump suggested this coronavirus could end by the warmer summer months, but scientists say it’s too early to predict.
2. People keep talking about the number of cases and deaths. But how many people have recovered?
There are more than 169,000 cases confirmed worldwide, among them at least 6,500 have died and more than 77,000 have recovered.
3. Is there a cure?
There’s currently not available any cure for the novel coronavirus. And while research is underway, it could take more than a year to get any vaccine for the virus.
4. Why is a cure taking so long?
An antiviral drug must be able to present the specific part of a virus’s life cycle that is important for it to reproduce, according to Harvard Medical School.
Now you can go to the World Health Organization (WHO) site and get news from there.