COVID-19 THE ECONOMIC COST: A Preview of the Current Situation
The COVID-19 virus has dominated the international news and affected our lives. Currently, the world's policies are busy protecting humanity against this virus, by taking many measures that will decrease the pervasion of the virus, including media and social media to spread awareness about the danger humanity is exposed to due to this pandemic.
After declaring it a pandemic by the World Health Organization, each country in the world has become officially isolated, so they were in the obligation to declare the situation of health emergency by avoiding circulation between cities, closing all public utilities, and restricting people's circulation by lock-down or social distancing (quarantine) until further notice.
The charts below show daily and total case trends. Data was added, and the charts were updated as of March 30th, 2020 (source)
"Total Cases" = total cumulative count (737,577). This figure therefore includes deaths and recovered or discharged patients (cases with an outcome) (source)
The data collected so far on how people are getting infected and how the epidemics is involving are unreliable.
There are three parameters to understand the situation in order to assess the magnitude of the risk posed by this novel coronavirus:
Transmission Rate (Ro) - number of newly infected people from a single case
Case Fatality Rate (CFR) - percentage of cases that result in death
Determining whether asymptomatic transmission is possible
The Economic Impact
The coronavirus outbreak, which originated in China, has infected more than 200 000 people; its spread has left businesses around the globe, counting losses.
It is too early to talk about an economic crisis caused by the COVID-19 pandemic, but we can evaluate the impact of the virus on economy so far.
"This virus is as economically contagious as it’s medically contagious," said Richard Baldwin, a professor of international economics at the Graduate Institute of Geneva.
It is considered as phenomena for the manufacturing sector in most high economies: Supply chain disruptions overall, and a decline in the demand on cars, electronics and many other manufactured goods as people take a step back and observe the turnout of the crisis.
A Nervous Stock Market
It is certain that we cannot consider the state of the stock market as a big economic factor, but it could be a sign that the investments in stock exchange will, surely, be affected, due to the virus, during the upcoming years.
The same applies to the travel and tourism industries, which have been pounded by the outbreak, by the cancellations of all events that regroup more than 50 persons, and cessation of all the trips around the World.
We cannot ignore the fight of oil production between Saudi Arabia and Russia that caused a decline in oil prices, and enhanced fears of a broader slow down.
Businesses are already taking a hit, but how bad it gets depends on how the virus lasts…
Strong companies like Nike and Apple are not going to be ruled out by this virus, "those are two companies that manufacture a significant amount of their products in China" - Randy Frederick vice president of trading and derivatives at Charles SCHWAB.
As considered, all businesses relying on China as part of their supply chains, and having big retail presences within the country, face the phenomena.
"I don’t think the Amazon platform has seen such a massive amount of inventory problems as we are about to see" reported the World Street Journal in February.
Then there are the airlines, which some experts say could lose as much as 100 Billion Dollars, and all the other businesses related to tourism as hotels, casinos, tour companies and more…
The question now is about whether this situation is going to lead the world through a global recession.
Everybody wants to know if this virus is going to cause a global crisis or not, the short answer is that it could.
"A recession is generally defined as a macroeconomic term that refers to a significant decline in general economic activity in a designated area, it had been typically recognized as two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators like a rise in unemployment" - Investopedia
What is happening in China, being the Octopus of the world's economy, will heavily affect the rest of the economies, the Eurozone countries are definitely simulating, their GDPs only increased by 0.1% by the end of last year, any unexpected movement may push them to a negative growth.
The United states being one of the strongest economies of the world, its GDP grew 2.1% in the last fourth quarter, so it could be more protected comparing with the rest of countries.
The New COVID-19 detonation has definitely exposed the weakness of companies, especially those that rely heavily on china regarding their supply chains and manufacturing.
This may engender companies to cut some of their dependence on China, and start to diversify supply chains to protect against major crisis that impact one country more than another.
Moreover, this virus is a good reminder for companies that are not relying on China, to start looking for other alternatives regarding their economies, because no one knows where or when the next pandemic might happen.
References:
https://www.weforum.org/agenda/2020/03/should-you-self-isolate-self-quarantine-or-self-monitor/
https://www.ncbi.nlm.nih.gov/pubmed/21871188
https://www.who.int/emergencies/diseases/novel-coronavirus-2019/advice-for-public
https://www.worldometers.info/coronavirus/
Edited by Hiba Arrame
