The global economy is passing through its most trying time since the meltdown of 2008-10. There were negative sentiments all around in 2019 with news of slowdown across major economies, unrest in Hong Kong and trade war between China and the United States which threatened businesses around the world. There were expectations that the start of the new decade would usher in some positive news in the market. But alas, a virus has hit the world economy with a sledgehammer. 2020 might just be the year remembered for coronavirus in years to come. This deadly diseases is threatening to lock down the world where workers would have to take sick leaves, people quarantined and countries shutdown to the outside world
The World Health Organization hasn’t yet called it a pandemic and so far has termed it as a Global Health Emergency but there are already signs that the virus has spread its roots across the world and by the latest count close to 120000 cases reported from 120 nations across the globe. China the epicentre of the global outbreak has already reported over 3000 deaths followed by Italy and Iran which have reported close to 1000 deaths between them. South Korea, France and United States are other countries that have reported multiple deaths so far. According to experts these numbers could rise astronomically if the virus makes it to the Sub-Saharan nations in Africa as the health infrastructure in these countries is least prepared to deal with a crisis of this scale.
The problem has been compounded by the fact that there is no known vaccination to treat the novel coronavirus. Pharmaceutical companies and research labs around the world are working on a war footing to speed up the development of a drug to treat COVID-19. The Bill & Melinda Gates Foundation along with Wellcome and MasterCard have already pledged $125 million towards the development of drugs that would be able to treat this problem. But it may be months before the first drugs are developed and clinically tested to treat with this problem. As the World Health Organization and medical bodies around the globe get into action to deal with this outbreak, business and economy around the world has been the worst sufferer.
China, where the outbreak happened early this year is already starting to feel the impact in terms of job losses. Manufacturing activities in the country have taken a serious hit since the month of January with several manufacturing hubs entirely closed down or working at snail’s pace as workers are forced to remain indoors. This has severely impacted the cash flow especially for smaller manufacturing units with nearly 35% of them stating they have reserves to survive just a month without activity picking up. With the country still struggling to contain fresh cases the overall impact of the virus on the job market is yet to be ascertained.
China halting its manufacturing signals bad days for the global economy given the grip Chinese goods have over the global market. With several economies in Asia and Africa completely dependent on trade with China and Chinese investments the tremors would be felt across the globe. According to a study by Harvard Business Review my mid-March several companies in Europe and the United States may have to temporarily shut down their assembly lines due to lack of supplies from China. The manufacturing output in China is currently worst since the 2002-2003 SARS-outbreak and even worse than one seen during the 2008-10 economic slowdown.
Travel, tourism and entertainment industries would the worst hit businesses due to coronavirus. It is estimated that this industry contributes close to 4% of the Global GDP with this being the backbone of the economy in several smaller nations of the world. Close to 400 million people or more than the population of the United States is engaged in this industry directly, and millions other draw benefits indirectly from this sector. As is being pointed out this industry would suffer its biggest loss since the global turmoil of 2008 if the spread of the virus isn’t addressed within the next few weeks. There are already reports of nations imposing strict travel restrictions with countries like Italy virtually quartering the entire nation. Millions of jobs would be at stake if fresh cases are reported from around the world in which case most of the travellers are likely to cancel their plans.
There are already news stories of airlines flying near empty flights or what is known as ghost flights just to avoid losing their slots at the busiest airports in the world. With people avoiding non-essential travel across the world the airline industry may end up taking a $113 billion loss according to the International Air Transport Association. Add to this another $3 billion loss that airports are likely to suffer with lesser footfalls this year and experts are already predicting at the worst times for the global airline industry since 9/11.
Automobile sector is another sector that would be severely impacted in the months to come. The industry has already been through crises over the last two years given the fall in demand for cars globally with people opting for ride sharing over car ownership. Several auto makers around the world have already halted their assembly lines. E-vehicle manufacturers would be worst impacted and most of these companies rely on China for battery supplies with three-fourth of batteries in the world being manufactured in China.
Coronavirus is surely the worst news global economy has had in the last decade. Millions of jobs are on the line and if the spread of these deadly diseases isn’t spread in quick time it might trigger the next big meltdown in the global economy. While experts are still unable to pinpoint on the total impact this would have on the global economy, there are strong apprehensions that it would take more than a year for the economy to recover from the total impact of this Global Health Emergency.