COVID-19: A threat to our economy

By Anushree Rajendran

The effect COVID-19 has on the world economy is becoming much more prevalent whilst writing this article. The COVID-19 pandemic has spread all over the world at the same time. Endemics like Malaria and tuberculosis provides a steady burden to some parts of the world. Whilst, Influenza fluctuates in pervasiveness and intensity; known to wreak havoc in developing and developed economies alike epidemic outbreaks. Currently, it is understood that COVID-19 takes over the pandemic position and is affecting the world economy dramatically.

From past events it is understood that economic risks are inevitable due to epidemics.In recent pandemics like Influenza has caused $500 billion income loss (approx. 0.6% of global income). Health impact of an outbreak is relatively limited, but the economic consequences are a multi-fold; For instance, there was 8% GDP declined from 2013-14 during the Ebola outbreak in Liberia[1], despite the insignificant change in mortality rate.

The economic costs of global diseases go beyond the primary damages incurred by affected sectors of respective countries. This phenomenon owes more to the inescapable economic shock wave that rides even faster than the disease spread itself.

WORLD ECONOMY AS SEEN:

Informed by precedents, the GDP sectors most affected by pandemics rank-wise are:

1. Wholesale and Retail Trade

2. Manufacturing

3. Information and Service

In detail, the tourist arrivals, export industries, retail sectors, service industries, land and air transport are among the many affected sub-sectors. A decline in consumer demands for certain commodities due to COVID-19 is also prevalent.

The direct demographic consequences are:

• Per capita income growth across states

• Risk-averse households increase fertility, which in turn increases child mortality rate than planned; putting down statistical plannings of a region.

• Impact on health expenditures and fiscal deficits

• Economy’s long-term growth is affected because of destruction of human capital

History led us to think that COVID-19 would affect our economies at a higher intensity. This is because the rate of bindings in businesses and social communities across the globe has undeniably risen in the past.

To have a better model to understand the impact COVID-19 has on World Economy, the following important parameters need to be taken into consideration:

(i) Country’s capital flow in the region and their linkages

(ii) Country’s trade of goods and services in the region and their interrelationships

The $74 Trillion Global Economy in One Chart:

Unlike other pandemics (i.e., Ebola, Influenza and SARS), COVID-19 affected powerful economies (China, USA, Italy, Spain, Japan, France, the UK, India, Canada and South Korea) dramatically. It could be suggested that COVID-19 can affect almost 50% of the World GDP. It leads one to think that the global GDP would be affected more than the past (encompassing previous pandemics and recessions). Unfortunately, COVID-19 is transmitted by humans who are the key contributors of the world economy.

Apart from a shock in the global economy, a potential extension to world law may emerge; pertaining to business communities in order to restore balance and revive the economy. This extension may surface and affect regions, community, nature of businesses and status quo differently. Possible recommendations tominimise economic shocks would be insurance coverages and prioritising vital industries to protect economies. Proactive steps to manage the risk of epidemics and mitigate its impact needs to be taken into. Although the COVID-19 pandemic postures a severe impact in the world economy today, hope that the World returns back to a better position which is stronger than the past.

ABOUT THE AUTHOR:

Anushree Rajendran is an undergraduate student of law at Tamil Nadu National Law University. The Chennai based author has been passionate towards Statistics, Economics and Law during her IGCSE curriculum onwards. As a young author, authoring more articles in Law and Socio-Economic forums, this is one of those articles for your appreciation.

REFERENCES:

JOURNALS

1. Fernandes, Nuno. "Economic Effects Of Coronavirus Outbreak (COVID-19) On The World Economy". Finance IESE Business School Spain, 2020, Accessed 30 Mar 2020.

2. OECD (2020, 2 March) “Global economy faces gravest threat since the crisis as coronavirus spreads”. Available at: http://www.oecd.org/economy/global-economy-faces-gravest-threatsince-the-crisis-as-coronavirus-spreads.htm. [Accessed: 30 March 2020]

NEWSPAPER

1. Roberts, C. (2020, March 17) “Europe Resorts to Unprecedented Restrictions on Public Life”. CNN Money Switzerland. Available at: https://www.cnnmoney.ch/shows/big-picture/videos/europeresorts-unprecedented-restrictions-public-life. [Accessed: 30 March 2020]

2. BBC. "Coronavirus Confirmed As Pandemic By World Health Organization". 2020,

https://www.bbc.com/news/world-51839944. Accessed 30 Mar 2020

WEBSITES

1. Lee, Jong-Wha, and Warwick McKibbin. "ESTIMATING THE GLOBAL ECONOMIC COSTS OF SARS". Ncbi.Nlm.Nih.Gov, 2020, https://www.ncbi.nlm.nih.gov/books/NBK92473/.

2. "Factbox: How A Virus Impacts The Economy And Markets". U.S., 2020, https://www.reuters.com/article/us-china-health-global-markets-factbox/factbox-how-a-virus-impacts-the-economy-and-markets-idUSKBN1ZK2HH.

3. "WHO Director-General's Opening Remarks At The Media Briefing On COVID-19 - 11 March 2020". Who.Int, 2020, https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.

"The Economic Risks And Impacts Of Epidemics - IMF F&D Magazine - June 2018 | Volume 55 | Number 2". Imf.Org, 2020,https://www.imf.org/external/pubs/ft/fandd/2018/06/economic-risks-and-impacts-of-epidemics/bloom.htm