On the 11 of March 2020, the WHO declared that COVID-19 can be characterized as a pandemic. Currently, there are about 1,991,275 positive cases and approximately 125,951 deaths which have been recorded around the world. (the number will have to be added according to the figures of the day on which you post this article) The virus has brought the world to its knees.
The COVID-19 pandemic is first and foremost a human crisis. Its most direct impact is on health and human well-being. The medical emergency and the public response to it — most importantly restrictions on movement — have also had a dramatic impact on economic activity, and led to significant job losses.
The deafening silence that surrounds the world right now is the result of the commerce industry coming to a sudden halt. The effect of the various measures taken by the Governments around the world to arrest the spread of the coronavirus is beginning to be felt across the economy.
Impact on the Global Economy
An analysis was carried out by the UN Department of Economic and Social Affairs (DESA) on the impact of the Pandemic on the global market. The following observations were made by the analysis:
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The global economy could shrink by up to 1 percent in 2020 due to the coronavirus pandemic, a reversal from the previous forecast of 2.5 percent growth, the UN has said, warning that it may contract even further if restrictions on the economic activities are extended without adequate fiscal responses.
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The COVID-19 pandemic is disrupting global supply chains and international trade. More than 100 nations around the world have now closed their National borders. Due to this, the movement of people and tourism has come to a screeching halt.
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With many countries declaring lockdown, the commerce industry has taken a hit. Millions of workers in the affected nations are facing the bleak prospects of losing their jobs. Many Governments have and the others are still formulating plans to roll out large stimulus packages to avert a sharp downturn of their economies which could potentially plunge the global economy into a deep recession.
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If the Governments fail to provide income and help boost consumer spending, it is said that the plunge in the Global Economy could be higher than predicted.
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With the loss in revenue for businesses, unemployment is likely to increase sharply which will transform supply-side shock to a wider demand-side shock for the economy.
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The debt distress for nations is also likely to rise with the decrease in commodity-related revenues i.e the decrease in the sale of goods. The decrease in sales will in turn decrease profit which means that the businesses will have to invest capital into their own businesses instead of making investments.
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This could force the Government to curtail public expenditure at a time when they need to ramp up spending to contain the pandemic and support consumption and investment.
What can the International Community do?
On the International front, globally- coordinated response measures to ensure that the virus should have minimal impact and will also serve as a signal towards a global resolve to combat the Pandemic which will reignite inclusive growth. As the Pandemic has spread globally, the repercussions have become a global problem that will require multilateral cooperation, including in health policies and international trade.
In order to ensure that the world does not have an economic crisis as a repercussion to the medical crisis, all the nations need to come together and must:
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Support countries most in need:
Major economies should come together and offer help to the under-developed and developing countries which do not have the resources to fight such a Pandemic. This can be done by major economies coming together to launch a large-scale, coordinated stimulus package of at least 10 percent of global GDP to help boost the world economy.
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Ensure adequate liquidity and resources
At present, the supply and demand cycle of many industries have come to a halt. It is important to ensure adequate liquidity and resources are maintained in the market otherwise the economy will plunge into a depression worse than The Great Depression. This can be done by providing emergency funds to the countries that are asking for it through the IMF.
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Prevent a debt crisis
The International Community should suspend the debt payments owed by the developing or under-developed countries. Following the example of IMF, which has allowed member low-income countries debt service relief for up to two years.
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Build a more sustainable future through national and international actions
Such a Global crisis provides a stark reminder of investment in public services and goods, including preparedness for economic and non-economic shocks. This can be implemented through various methods such as increasing investment in risk management. As it always said, precaution is better than cure.