HOW IS THE WORLD ECONOMY IMPACTED BY THE CORONAVIRUS OUTBREAK?
The year 2020 has been one of the most unexpected years due to the COVID-19 pandemic spread across the world. Due to the crisis, there have been countries and their respective industries that have experienced the lockdown and slow down in their businesses. It eventually meant the loss of business and the slow flow of income in the economy. As per the recent statements rolled by the United Nations, there are predictions that the global economy would further see a shrink of up to 1 percent in the remaining months of 2020. However, previously there were predictions that the economy will grow 2.5 percent, but the opposite has happened now.
Here are some detailed outcomes of the analysis done by DESA (UN Department of Economic and Social Affairs:
COVID-19 Pandemic has, no doubt, shaken all the industries out there. But it has disturbed the cycle of international trade and supply chains the maximum. 100+ countries globally had announced a lockdown, which meant the closing of the nation including their shipping/logistic operations. Thus, there is considerably less flow of goods in and from the countries.
There are millions of courier companies and logistic operators out there who have either lost their businesses or are on the verge of closing down their operations. However, companies like Rateparcel, which helps their customers ship their items within Canada or around the world, have seen a surge in their online business as people don’t have to go out of their homes to courier or parcel their items. From the selection of courier companies to deciding on the shipping rate to finally printing the shipping labels to be pasted on the consignments, everything is done online and this zero contact. Governments of the various nations have been considerate enough to roll out the growth stimulus packages. These steps today, designed in a way that helps to save the economy from leading towards a severe and deep recession.
As per the worst-case scenario and anticipation, the world economy could easily contract by a whopping 0.9 percent in the remaining months of 2020. There has been a comparison made to the year 2009. In this year, the world economy had contracted by a massive 1.7 percent. 2009 as a year was considered to be a year of the global financial crisis, and now 2020, it is compared to 2009 due to many similarities.
Analysis also claims that if the government does not act proactively and fails to provide support in terms of income to the workers, the contraction will further rise. The government needs to come up with extensive measures to boost consumer spending and keep the economy growing.
The impact on the economy and its severity will majorly focus on two broad factors which are:
- The kind and extent of restrictions and its duration. Depending on the limitations involved in the economic activities of the countries, the movement of people, etc.
- The fiscal responses of the economy in terms of the efficacy and actual size.
As per the forecast, a further lockdown in the areas of North America and Europe will have a substantial negative impact on the service sector. The effect will be severe in industries that involve any physical interactions such as hospitality, retail trade, transportation services, leisure, recreation, etc. The unfortunate part is that the industries, as mentioned earlier, constitute more than a quarter. Hence, there are more chances of the economy going down.
Hence, this is the time when the government needs to act in a very structured way. Each government of the various nations needs to have a properly designed fiscal stimulus package to curb the spread of the coronavirus.