IMPACT OF COVID-19 ON THE WORLD ECONOMY

BY HIMAKSHI BUTAN

In his speech, Mr. Arne Sorenson, CEO Marriott International, said “the immediate economic impact of the current Covid-19 pandemic on the company’s business is greater than 9/11 and the 2009 financial crisis combined’. His heart-rending speech conveyed the struggles almost every business is facing right now.
The uncertain longevity of the outbreak has made the world extremely anxious. Despite the expeditious efforts of governments in tackling the situation, Covid-19 is expected to have dire economic ramifications. According to the UN, grappling the virus can cost the global economy around $2 trillion. The global growth rate is expected to decline from 2.9 percent to 2 percent. Moody, has predicted the growth rate of 2.1 percent while Rabobank, a Dutch multinational banking and financial services company, has predicted the same to fall to 1.6% causing a major slowdown in the global economy.
Some countries in Europe like Italy, Spain, Germany, France, and Iran are under grave stresses and have been under lockdown for more than a month. Due to the fragile plight of most economies in Europe, it is most likely to go into recession. Isolation of china, the largest exporter of the world and the largest supplier of mobiles, automobile, and computer components, for the past 3 months has led to a halt in various industrials chains all over the world. Most countries have closed their borders and are imposing travel and trade restrictions.

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Small and medium scale industries and startups have not been able to survive the blow and have shut down. The travel industry is hit the worst. Tourists are canceling flights and trips which is putting tremendous stress on these businesses. Strict lockdowns have brought the industrial production chain to a standstill. The virus has been a hindrance to work, education, entertainment, fitness, leading to a decline in economic activity. Cancellation or postponement of all public activities has reduced consumer spending and has brought down the velocity of spending.
The volatile financial markets have been continuously reacting to these shocks. Stock markets all over the world have seen a dip since the emergence of Covid-19. FTSE, DOW JONES, DAX, CAC, NIKKEI, SENSEX have seen a deep cut by 29.72%, 27.95%, 33,37%, 33.63%, 26.85%, 17.74% respectively( as of 16th march). The impacts are expected to last longer.
If this undesirable situation continues to persist beyond April, the economic impact is expected to worsen. Now, it is upon the governments to implement various fiscal measures and policies to enable speedy recovery of the economies. We must ensure that we abide by the instructions given by the government to fight Covid-19 which will prevent the further dampening of the global economic scenario.