Coronavirus has become global pandemic. This virus first found in China, has now infected about 198 countries of the world. There is no proper treatment for this type of virus. Unfortunately, even now, the scientists are totally helpless in this regard. It cannot be denied that the coronavirus has great negative impacts on the global economy. The world leading economies are in trouble after coronavirus outbreak. The cases are increasing day by day. Due to the lockdown and its quick spread compelled the world to leave all businesses activities, financial markets, corporate offices, and economic events. Millions of people throughout the world lost their jobs. The rate of the poverty is increasing once again in the world. This is becoming a source of pressure on the governments and their economies. Resultantly, the global economy is deteriorating day by day.
IMF says that the international economy will decrease 3% in this current year and it would be worst as compare to Great Depression of 1930s. There is no exact method to estimate the exact economic damage due to coronavirus. If the virus will remain for a long while then the damage will be overestimated and the world would be in trouble once again. The world leading economies are getting downwards due to the shutdown of economic activities. The demands of the poor are increasing, and they are facing a lot of problems as well. That could be a source of some changing in the world’s economic system.
Analysis
The world had already been experienced the global financial crisis for many times. Now, the global tourism, hospitality, game and sport, oil, import and export, transportation and many other industries have been shut down due to the coronavirus outbreak, which is leading the global economy towards a crisis once again.
Many countries of the world depend on the tourism as a source of income. The stay-at-home policies ended or discouraged the tourists to spend their free time in deferent countries. Due to the restriction of international travelling, tourism has been shutdown. Many countries have widespread areas for amusements activities. They have only tourism and no other means of income. Now, it has become difficult for these countries to keep the body and soul together. It is beyond her power to face the global challenge as well.
The shutdown of hospitality industry due to the stay-at-home policy’ and ‘social distancing’ policies imposed by the different countries of the world, led towards cancellations of all bookings. All owners of the hotels and restaurants have shutdown their businesses. Many hotels and restaurants in the UK, the US and in different counties announced the provisional suspension of usual operations. Which has been become case of the estimated loss of jobs to 34.3 million globally, and 4.9 million in the US alone. The economic impact of the pandemic on the hospitality industry was harsher than the 9/11 and 2008 recessions combined.
The games and sports industry was brutally affected due to corona virus outbreak. All major football events were suspended after the virus outbreak. In cricket, Pakistan Super League, Indian Premier Leagues and many others were also suspended. The major other events that have been postponed are as follow: The Tokyo Summer Olympic and Paralympics games, 2020 hockey games in England, England's FIH Pro League games, The Motorsport game in Portugal, the World snooker championship, the 2020 European Aquatics Championship. Resultantly, the loses are in billions of dollars.
The rentier states, whose main income depends deeply on the extensive rents from foreign individuals or governments, are also facing the challenges of economic degradation. More than half of the state’s revenues in Saudi Arabia, Oman, Kuwait Qatar and Libya have come from the sale of oil. The Jordan, Syria and Egypt earn large rents from payments for crossing of pipeline, transit and passage through Suez Canal. Now due to the international restrictions on transportation and the lack of usage of oil, their economies are in trouble. The less spending of oil and the extensive production is leading towards crisis. This less spending also created the problem of the space of storage which is also the source of the getting low price of oil. It is expected if the virus will remain for a long while then the price will not only get low but it will reach till none. Resultantly, the volume of the international trade will be decreased unexpectedly.
Different countries of the world imported their essential commodities from the largest exporting countries like China and Japan. On the other hand, the major exporting countries need raw materials from the third world countries. The balance between export and import has disturbed due to the coronavirus outbreak. China as world’s largest manufacturer and exporter, this problem has been facing after the first detection of the virus. According to the one estimation, China loosed approximately $200 billion in this regard. While the importing countries facing the problem of inflation due to the sudden shutdown of Chinese industries or reductions in supply.
The most noticeable result of the COVID-19 crisis on financial markets was the effect in the global stock markets. Global stock markets lost $6 trillion in value over six days from 23 to 28 Feb 2020. Between February 20 and March 19, the S&P 500 index fell by 28% (from 3,373 to 2,409), the FTSE 250 index fell by 41.3% (from 21,866 to 12,830), and the Nikkei fell by 29% (from 23,479 to 16,552). In the same period, large international banks witnessed a plunge in their share price, for example, Citigroup’s share price fell by 49% (from US$78.22 to US$39.64), JP Morgan Chase’s share price fell by 38% (from US$137.49 to US$85.30), and Barclays’ share price fell by 52% (from £181.32 to £86.45). Although the oil price war, in which Russia and Saudi Arabia are the main actors. They were getting down the oil price by increasing oil production. It played a role in the fall in stock markets indices; the subsequent fall in stock market indices in March was mainly due to investors’ flight to safety during the coronavirus pandemic.
The down fall of the financial sectors like Banks were also affected the international economy. During the outbreak of the virus, there was a comparatively decline in the volume of bank transactions, a decline in card payments and a decrease in the use of ATM cash machines throughout the world. This led towards negatively affected banks’ profit. On the other hands, the higher demand of online services such as online shopping and banking were increased due to the lockdowns.
The International Air Transportation Association (IATA) released a statement that the air travel industry would lose US$113 billion if the virus could not contain on time. The emirates and Qatar airline are considered as world’s most favorite travelling agency. These airlines are also playing very important role in their economies. They are not only their source of strength of their economy but also the sources of expending global economy. They are not in functional due to the restrictions on international travelling.
Conclusion
The coronavirus outbreak has negatively impacted the global economy. Due to the lockdown and its quick spread compelled the world to leave all businesses activities, financial markets, corporate offices, and economic events. Resultantly, global economy loses millions of dollars in every single day. Lockdown and the social distancing policy are becoming the main cases of the deteriorating economic conditions in the different countries. Because it prevents major economic activities like the global tourism, hospitality, game and sport, oil, import and export, transportation and many other industries. The global economy is therefore leading towards a crisis. Major exporting countries have shut down their industries which is the source inflation in the form of more demand and less supply. While the less demand of oil and more production is casing the downfall of oil prices.
In brief, the economic system of the world is going to be experienced some new types of crisis that can change all the systems. Because after Great Depression and the World War I and World War II, this is the first time that the world is totally in the jammed situation. In this regard, different governments of the world have been launched different supporting strategies for their economy. But it seems none to nothing in front of the pandemic because by considering the increasing cases of the coronavirus. If the world would not be able to contain the virus then the global economy would be in serious challenge.
References
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