It takes relatively less time for a country’s economy to knock down as it would take to grow. The reason for a bearish economy can be a sudden change in the respective country’s government policies, crashing of a huge financial institution (viz. subprime-crisis 2008), and many more. But 2020 is an exception, being hit by a global pandemic, many economies along with the major ones like the US and China having a stake of around 23.6% and 15.5% respectively in the global economy are facing a major recession in the early 2020. Now, let’s see the effects coronavirus on world economy.
Major world markets are too hit hard by the ongoing pandemic. Most of the markets went below 30% in just a couple of months. Every country’s stock market went insanely volatile and went strong bearish after lockdowns were imposed. DOW JONES, FTSE, and some Asian markets like SGX, NIFTY are some of the many hard-hit indices. In fact, even making S&P 500 hit its lower circuit.
Now, let’s see what the above numbers try to communicate in terms of social lives. One of the major solutions to this hardship is social distancing, which directly drags our attention towards the gatherings, get-togethers, meetings, other activities which involve the encounter of more than 2 persons.
Which involves temporary school closures, college closures, company shutdowns etc. Poor students studying in public sector schools faced problems as these schools were aid for their lunch-time meal. Now going through the actual number would result in a conclusion that the widespread school closures would make 30 million kids go without their mid-day meals!
People working as an employee in a company are also the victims of these closures. Many companies are trying hard to survive in this situation by making their employees work from home. But the service-based companies, whose profitability rate are declining every month after lockdowns are cutting off their employee number, making a lot of people go jobless.
Talking as of early May 2020, there are over 3 million unemployment claims in the US itself. And if this thing goes on for a longer period, there could be more than 50 million unemployed people on a wider perspective. Moreover, the US saw an economic crash of about 1.1 billion USD in early March of 2020.
Along with this, many international sports events, tech meets were either cancelled or postponed. Some of these sports events include the suspension of professional sports leagues like NBA whose tickets were sold, which made them an overall loss of around 350-450 million USD. Also, the Tokyo Olympics are postponed for the same reason. Tech events like Google I/O 2020 and Facebook’s Developer Conference 2020 were held online. Other tech events include the Mobile World Congress popularly known as MWC was cancelled by GSMA which made a loss of 492 million euros for Barcelona, Spain.
As the world is going through this phase, there are some hard-hit economic sectors claiming that they would take at least 3-4 years to generate the revenue as they were generating in the past couple of years. And those are,
Airlines are the first and the worst-hit victims of this economic hardship. Almost all the countries urged their airline companies to cease down their transportation aid. Talking specially about airlines Boeing and Airbus are major victims. Others include Etihad, Emirates, etc.
Because of these consequences, almost all the airline companies had to shut off their transportation making them hard to generate revenue. So, as airline companies are unable to generate revenue, they are cutting off their staff. It was observed that Norwegian Airlines had to lay off 90% of their employees in March. Even making Warren Buffet sell off his stake in 4 major airline companies. Moreover, Avianca, the world’s second oldest airline company filed its bankruptcy due to COVID-19.
As the transportation industry was layed off, so were the other industries which were directly dependent on it. The delivery and shipping industry has also been burned by the virus. ICS (International Chamber of Shipping) said, the industry is losing around 350 million USD every week due to port closures and shutdown of transportation.
Many SaaS companies are showing some alert sign of this impact. Ever since the outbreak of the virus, tech industry is facing trouble with the supply chains. Apple, a tech giant is alone expected to lose around 67 billion USD, while other manufacturers of smartphones, computers, laptops, and other tech gadgets are already facing the crisis. But software and applications which can establish connectivity between people made a boom. App like Zoom even overtook Skype in this category.
The dining industry has also seen a major downgrade in its revenue. Over 60,000 restaurants in the US are facing financial crisis amidst coronavirus as observed by OpenTable. Many countries’ restaurant industry has also seen a downfall of around 30-40% which is very miserable from an economic perspective.
As it can be seen in the above chart, the major downfall started in March as the lockdown were brought in to action.
These were some of the major industries which contributed a good percentage in a country’s economy. Many economists suggest that this recession would take years to gain its previous value. The main reason for this global economic downgrade is not the result of instability in the financial system, instead, this is the result of measures to prevent a health crisis. “A health crisis could become a great depression if we don’t deal with it now and provide that support to get through this period of time and have a recovery”- Grant Thornton LLP