Question

how will covid affect the economy

Answer 1

As a result of the coronavirus pandemic, the global economy could decline by up to 1% in 2020, a reversal of the previous estimate of 2.5% expansion, it could contract even more if constraints on economic activity are extended without adequate fiscal responses.

COVID-19 is a pandemic which disrupts global supply chains and international commerce. Over the past month, with nearly 100 countries closing national borders, people's movement and tourism flows have come to a shrill halt.

"Millions of workers in those countries face the grim prospect of losing their jobs. Governments are proposing and deploying massive stimulus programs to avoid a sharp decline in their economies that could potentially plunge the global economy into a deep recession. In the best-case scenario – with modest decreases in private consumption, investment and exports and an rise in government spending in the G-7 countries and China – global growth will fall to 1.2% by 2020.

The extent of the economic effects would depend primarily on two factors – the length of restrictions on people's movement and economic activity in major economies; and the actual scale and efficacy of fiscal responses to the crisis. A well-designed fiscal stimulus plan, prioritizing health spending to curb the spread of the virus and providing income support to households most impacted by the pandemic will help reduce the risk of a severe economic recession, urgent and ambitious policy steps are needed not only to contain the pandemic and save lives, but also to protect the most vulnerable in our communities.

Developing countries, particularly those dependent on tourism and exports of commodities, face increased economic risks. Global manufacturing production could decline dramatically, and the plummeting number of travelers is likely to harm the tourism sector in small island developing countries, which employs millions of low-skilled employees. Meanwhile, declining commodity-related income and capital flows are raising the possibility of debt hardship for many nations. Governments may be forced to slash public expenditure at a time when they need to increase spending in order to combat the pandemic, and to promote consumption and investment.