Impact of Corona Outbreak on Economy
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Impact of Corona Outbreak on Economy
Why in the news?
The recent outbreak of deadly pandemic COVID-19 has impacted several sectors especially transport, tourism, hotel industry, export, etc.
The impact is huge and not only on Indian GDP but also on the global economy.
This has led to the crash of the share market across the globe.
The new coronavirus, which first emerged in the Chinese city of Wuhan last December, has infected 180,000 people globally and at least 140 countries are affected.
The virus outbreak has become one of the biggest threats to the global economy and financial markets.
Major institutions and banks have cut their forecasts for the global economy and fears of the coronavirus impact on the global economy have rocked markets worldwide, with stock prices and bond yields have been plunging.
The global economy is expected to grow by 2.4% in 2020 — down from the 2.9% projected earlier.
The slowdown in the manufacturing sector:
The manufacturing sector in China has been hit hard by the virus outbreak. Such a slowdown in Chinese manufacturing has hurt countries with close economic links to China, many of which are Asia Pacific economies such as Vietnam, Singapore, and South Korea.
With the virus outbreak across various countries factories have been locked down due to safety measures.
Both demands and supply have reduced drastically.
Abstinence of Workforce
Trade has been affected globally
Impact on the global job market:
The pandemic is going to increase global unemployment significantly keeping at least 25 Million people out of work - United Nations
COVID-19 is no more only a health crisis but it is a major labor market and economic crisis which has a far-reaching impact-International Labour Organization
In the U.S. and the rest of the world, waves of layoffs seem inevitable, especially in industries most vulnerable to an economic standstill:: Travel, entertainment, hotels, restaurants, the retail stores-the heart of the service sector which makes up most of the economy.
The daily wagers and informal job market and MSME sector are going to be affected the most.
China is not the only country where the services sector has weakened. The services sector in the U.S., the world’s largest consumer market, also contracted
One reason behind the U.S. services contraction was a reduction in “new business from abroad as customers held back from placing orders amid global economic uncertainty and the coronavirus outbreak”.
Global tourism has been affected terribly.
The associated businesses like hotels, restaurants, travel businesses, aviation, transportation, etc. are also severely affected.
Major offices have been locked down or employees have been granted leave or work from home.
Educational institutions have been closed until further notice.
Declining Oil Prices:
A reduction in global economic activity has lowered the oil demand, taking oil prices to multi-year lows giving a major shock to the supply side of the member countries of OPEC(Organization of the petroleum exporting countries).
China, the epicenter of the coronavirus outbreak, is the world’s largest crude oil importer. The demand has reduced drastically.
The spread of the virus in Italy and other parts of Europe is particularly worrying and will likely dampen demand in OECD countries as well
Note:: OECD(Organisation for Economic Co-operation and Development) is an intergovernmental economic organization with 36 member countries, founded in 1961 to stimulate economic progress and world trade. Most OECD members are high-income economies with a very high Human Development Index (HDI) and are regarded as developed countries.
Stock Market Crash:
Fear surrounding the impact of COVID-19 on the global economy has hurt investor sentiment and brought down stock prices in major markets across all countries.
Impact on Indian Market::
Since China is an important source of major inputs for many sectors, the supply shock can lead to a higher price of inputs, which in turn will affect the price range of all commodities up the supply chain.
Simultaneous demand and supply-side shocks to the economy will have implications on the banking sector drastically.
This is a crucial time for India as it was already struggling with its economic slowdown before the outbreak of the Coronavirus. This is going to take a heavy toll on economic growth.
The combination of fiscal policy and monetary policy is the only way out.
The govt is trying its best to control the outbreak by taking several steps such as
a. Sealing the international borders and increasing surveillance to screen out infected ones.
b. Isolation of infected persons and quarantining them for observation
c. Testing lab and other facilities
d. Social awareness campaigns through print and digital media
e. Helpline numbers and 24*7 medical service.
f. Closing down malls, gyms, parks, and the imposition of section 144 to avoid gathering of people.
Above all, the Govt must leave no stone unturned to stop the spread of the viral infection. If the pandemic is not controlled the issue will become over complicated.
Along with the Govt., civil society has a bigger role to play here. Self-awareness and a sense of responsibility is the key. Everyone should come forward to join their hands to save each other from this crisis.