The World Economy and Coronavirus

-SURAJ CHATHLINGATH (CORRESPONDENT)

The last months of 2019 witnessed an outbreak of a new coronavirus in China’s Hubei province. Since then, infections have been confirmed in at least 200 countries and territories. Now there are more than a million confirmed cases around the world and over 60,000 deaths. 

According to WHO, coronavirus disease, or its commonly referred name -COVID-19- is an infectious disease caused by a newly discovered coronavirus called SARS-CoV-2. This virus is among the 7 types of coronaviruses that can affect humans. Governments around the world are promoting practices of strict social distancing and respiratory etiquette. There are entire countries on lockdown with billions of its citizens forced to remain inside their houses to contain this outbreak.

The death figures are high, especially among the infected elderly, where the death rate is 14.8% for those aged above 80 years. Compared to that the death rate among people belonging to the 20-29 years age group is just 0.2%. It’s not the case fatality rate (CFR) of COVID-19, but its rapid transmission, which is making it a major disaster in modern human history. During the beginning of March 2020, the total cases were 87,137, but it skyrocketed to over 860,000 cases by the end of the month, a whopping 10 fold increase. Considering the magnitude of this, the UN Secretary-General António Guterres famously labelled this as the “biggest challenge for the world since World War 2”. Adding to that, he said it could bring a recession “that probably has no parallel in the recent past”.

In assessing the situation, it is evident that the world economy is among the worst hit by the pandemic. Along with the health sector, the world economy, in general, has come to a standstill due to unstable markets and a sudden spike in COVID-19 cases. Businesses around the world have thus seen a setback. Central banks in many countries, including the RBI in India, have cut interest rates this year. Stock markets are witnessing huge shifts. The FTSE, S&P, NASDAQ, Nikkei and the Dow Jones Industrial Average have all seen huge falls, especially the FTSE and the Dow which recently saw their biggest one-day declines since 1987. The unemployment rate in countries, including India and the US are at record highs. Fearing an imminent decline in American economic expansion, the Trump administration and the US Senate passed a $2 trillion coronavirus stimulus package which aims to help workers and businesses from total collapse. Many countries followed suit, including India who announced a $22 billion relief package under the Pradhan Mantri Garib Kalyan Yojana to fight this outbreak. However, India’s plans pale in comparison to the rest of the world where countries are spending over $5 trillion, with the city-state of Singapore pleading $34 billion and the United Kingdom with a £350 billion bailout plan. 

The fear of an economic collapse is brainwashing even the elite. When the news of the suicide of Thomas Schäfer was reported, the finance minister for the German state of Hesse, the world couldn’t let it pass like an isolated event. “He clearly couldn’t see any way out. He was desperate, and so he left us”, said Volker Bouffier, confirming Schäfer was living under considerable stress and worry because of the COVID-19 pandemic. The situation on the other side of the Atlantic is not very different – in the US panic struck when Republican Lt. Governor Dan Patrick called for the sacrifice of the American elderly to save the country’s economy.

This COVID-19 panic prevails all around the globe. It is affecting every economy; developed and developing, rich and poor, from global leaders to poor but developing African nations. According to CNBC Africa, “African oil-producing and reliant countries, in particular, Senegal, Nigeria and Angola continue to face new challenges each day amid the threat of economic fallout.” Their report further states that “Angola revises national budget and suspends CAPEX; Senegal’s first oil development faces debt arrangement challenges; Nigeria poised for a major revenue loss; Analysts predict Ghana will get half its projected revenue; Cameroon can expect to see a three percent drop in economic growth.” Oil prices have downed into a level not seen since June 2001, triggering a standoff between Russia and Saudi Arabia in the process. Even safer investments like gold got hit. As the world economy is predicted to grow at its slowest rate since 2009, the question is, can anyone spot a recession on the horizon?

As governments around the world introduced travel restrictions, the travel industry too took a beating. Airline companies had no choice but to cut their flights, and in some cases, completely cancel entire routes. With virtually no business or holiday tourism happening anywhere, tourism-dependent regions like the Maldives and the Caribbean are getting affected. A chunk of their population are involved in related businesses, and with no foreign tourists in their countries to trade with, these people are left counting costs. 

The talk of a global recession is unquestionably present among financial analysts. Considering the predicted loss of trillions of dollars, this could be catastrophic to our world which is already saddled with “record levels of debts” according to The New York Times. Developing countries are going to bear the brunt of it, with likely exceptions of India and China, according to the latest UN trade report. However, there was no detailed explanation from the UN as to why India and China will be the exceptions.

Even in the midst of these dark times, there is still positivity for an optimist to spot. The lockdowns halted the world’s industrial production and vehicular traffic, resulting in improved air quality levels all across the globe. India’s major cities like Delhi, Mumbai, Pune, and Ahmedabad are all-seeing “satisfactory” AQ index after a long time. Many animals like nilgai, deers and the rare Malabar civet cats are also being spotted, roaming free on the empty streets of once busy cities. It is still not fully apparent whether the COVID-19 pandemic will force the global economy to completely collapse, but it definitely has shed light on the vulnerability of our social fabric.

REFERENCES :

World Health Organization [online]. Available at : https://www.who.int/health-topics/coronavirus#tab=tab_1

Chikermane, Gautam (2020). Observer Research Foundation [online]. Available at : https://www.orfonline.org/expert-speak/10-ideas-to-fight-covid-19-63698/

Jones, Lora; Brown, David; Palumbo, Daniele (2020). British Broadcasting Corporation [online]. Available at : https://www.bbc.com/news/business-51706225

Worldometers [online]. Available at : https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/

Africa Press Office (2020). Consumer News and Business Channel Africa [online]. Available at : https://www.cnbcafrica.com/apo/2020/03/31/angola-senegal-cameroon-ghana-and-nigeria-among-the-most-hard-hit-amid-covid-19-and-oil-price-plunge/

PTI United Nations (2020). The Hindu Business Line [online]. Available at : https://www.thehindubusinessline.com/economy/world-economy-will-go-into-recession-with-likely-exception-of-india-china-un/article31214695.ece#