Economic Consequences of Coronavirus
By Brandi Marcene
The devastation caused by the COVID-19 pandemic has left everyone hyper-vigilant. People who have real-time access to data and information related to the virus are working round-the-clock to maintain stability or introduce affordable adoptions.
So far, the world has seen 2.74 million confirmed coronavirus cases from which there have been nearly 192,000 deaths since the initial outbreak. A healthcare issue of this scale and magnitude, compromising so many lives, has severe effects on the economy of the world as well.
In this article, we give you the most prominent effects, hits, and consequences the world economy is facing as well as the possible prediction of what could happen after the peak of this pandemic.
Global Impact of COVID-19
Since the outbreak, the pandemic has encompassed over 190 countries in the world, including all 50 states of the US. The measures taken to control its spread, as well as the disaster left behind by the virus, it all contributes to a noticeable massive impact on the global economy.
If the currents conditions persisted, experts estimate global economic growth to be reduced by 2% per month and the global trade to fall by 13 to 32%. These numbers are also heavily dependent on the extent and depth of the global economic downturn. Experts further state that they will know the complete information only after the pandemic peaks.
On a more positive note, the environment, especially, in those places experiencing quarantine lockdown, are returning to its original form. We are observing pollution-free air, clear blue skies, and crystal clear waters after a long time. This was the only positive news out of this whole ordeal.
Wall Street Feels the Impact
No one was more surprised at the failure of the financial markets in 2008 than the former Federal Reserve chairman Alan Greenspan. He infamously expressed his shock and disbelief in having some of the smartest people in the world and not predicting something like this.
This is why today, most people find themselves second-guessing the wisdom of wall streets in the wake of coronavirus. Although generally keeping stable, the market has been seesawing since the start of this outbreak, and pundits predict it to head toward depression.
In March, the market experienced its initial plunge, and the increasing unemployment rate is only going to add fuel to the fire. The so-called gig economy will also come under the effects of economic downfall, and the recovery from this fall will not be an easy one for anyone.
Jerry Seib, a columnist in the Wall Street Journal, explained how, although the coronavirus pandemic will be damaging for the entire economy, but its effect will be most prominent on the millennial. He went on to explain how the millennials were just recently catching up to the economy in 2017-2018 after the great depression of 2009 when the virus put their jobs, wages, and insurance all at risk.
He says how most millennials had postponed important life events like getting married, starting a family, buying a house, or a car, in the whole of stabling themselves first, only to be thrust into another recession.
A Slump in Chinese Economy
China experienced massive shrinkage in its economy for the first time since 1992. The Chinese economy shrank by 6.8% during the first quarter of 2020. The GDP was not the only thing suffering badly from the COVID-19 outbreak.
Over 4,000Chinese’s lost their lives, retail sales fell by 15.8%, and roughly 5 million people lost their means of earning. The lack of confidence in the authorities also resulted in an investment halt, which explains why the fixed-asset investment market shrank by 16.1%.
However, the Chinese government and authorizes are making every effort to stop the mounting job losses, which explains how the urban jobless rate started recovering from 6.2% to 5.9% in March. The stock market of china also seems to be climbing despite the dismal GDP data.
Slump in Oil-Demand
With the ban on travel, quarantines, lockdowns, and economies shutting down temporarily, the effects are apparent in the oil industry. While the demand for oil rose to as close as 1 million barrel per day until February, the world’s three big oil forecasting agencies predicted a horrifying slump in demand. The new demand for oil translates in a slump of 5 to 9 million barrels a day.
Rystad Energy AS presents an even more terrible number of falls by 27 million barrels a day for April. It seems like the pandemic wiped out the demand for crude oil from the entire world.
Other economies and sectors most disrupted by the COVID-19 pandemic include:
- South Korea, Japan, and Australian economies
- The economy of the US and other major European regions
- Travel and tourism industry
- Hospitality industry
- Other industry revolving around high social interactions like restaurants and sporting events
Impact of COVID-19 on Insurance Industry
If there is one industry capable and expected to prepare for the unexpected events, even the pandemic it’s the insurance industry. Yet the potential long-term impact of the pandemic on the insurance industry, include the following:
- Insurers will experience a time-lag in the notifying, insuring, assessing, and payment of their claims.
- Failing interest rates and equity markets will put pressure on the balance sheet of insurers, the life product profitability, and the products of savings-investment management fees.
- Insurers with the most well-diversified portfolios will be least affected by the losses arising from the pandemic.
What are the Predictions by Pundits?
The future is an unpredictable thing, which is why many people refrain from making predictions that can very well end up right in their faces. Pundits, however, are experts in their field, and are called to provide their educated opinions. This is why, in the case of coronavirus, we turn to pundits to give us relevantly reliable predictions.
Some pundits are predicting that while the world will feel the effects of the pandemic for a long time, mostly, there will be no change. Other pundits predict it as the end of peak globalization.
To sum it up, the news is grim, and the situation is looking bleak. Even with the most prompt actions form the world leaders and authorities, we can still expect the effects of the pandemic to be long-term and exceptionally brutal to the people of lower socio-economic class.