Question

What are 3 of the biggest impacts of COVID-19 on the economy? I need 3 examples with citations for a paper.

Answer 1

1. Supply chain and market disruption- Many manufacturing companies rely on imported intermediate inputs coming from China and other disease-affected countries. Many businesses also depend on sales to reach financial goals in China. The slowdown in economic activity and restrictions on transportation in affected countries are likely to have an impact on the production and profitability of specific global firms , particularly in manufacturing and raw materials used in production. For companies relying on intermediate goods from affected regions and unable to switch sourcing easily, the impact size may depend on how fast the outbreak fades. Small and medium-sized enterprises may have more difficulty surviving the disruption. Travel and tourism tied businesses face losses that are unlikely to be recoverable.

2. Imapct on Financial Markets- Some firms, especially those with insufficient liquidity, may be pressured by temporary input and/or output disruptions. Financial-market traders may or may not properly anticipate or understand which companies may be vulnerable. The resulting increasing risk may disclose that one or more key players in the financial market have taken unprofitable investment positions under current conditions, further undermining confidence in financial instruments and markets. A possible (probably low-probability) event would be a significant disruption to the financial market as participants become concerned about counterparty risk. A much more likely possibility is a major decline in stock and corporate bond markets, with investors prefering to hold government securities (especially US treasuries) due to the uncertainty caused by the pandemic.

3. Global GDP growth- The 2020 projections ranged between -8.8% and 1%. Among those forecasts, the key reference point for evaluating the economic effect of COVID-19 is the International Monetary Fund's. Global growth will therefore shrink by -4.2 per cent, a difference of 7 percentage points compared with pre-crisis projections