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In: Economics

Impact of Corona Virus (COVID-19) on the economy?

Impact of Corona Virus (COVID-19) on the economy?

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Expert Solution

The brightest spot was the U.S. job market after years of stubbornly weak economic growth and inflation, with unemployment hitting half-century lows. Coronavirus may have put the boom to an end. With pathogens rising, lockdown towns, companies dropping shutters and most moving on ice, employee layoffs are likely to become mushrooming. This was expressed in the number of Americans who filed applications for unemployment compensation that hit a high of over 3 million

The unprecedented $2 trillion fiscal stimulus package from the government includes a $500 billion program to assist hard-hit sectors, and a similar sum to finance direct grants to U.S. families of up to $3,000 a item. Economists expect the payroll data to show a loss of 293,000 jobs-the biggest monthly fall since July 2009. A major overshoot of that and Congress approved $2 trillion stimulus could immediately begin to look insufficient.

Chinese policies on social isolation seem to have suppressed the coronavirus at home, allowing work and travel to resume. Yet substantial economic losses can still lie ahead. Despite diseases exponentially growing in the US, Europe, and the other markets supplying to China, and supply chains in disarray, China is neither having the imported materials it wants nor demanding for its goods. Jan-Feb income from Chinese factories have already reached their lowest in a decade, and more suffering will very likely be exposed in coming manufacturing surveys. Just as anywhere else, job losses are mounting, irrespective of how many cheap loans companies are being given.

The European Central Bank has done its best to counter the damage caused by the epidemic, having dramatically increased asset purchases, settled to more flexibility in the share of bonds it buys from each country and buffered borrowing costs for poorer eurozone states like Italy. Then it is up to the members of the European Union to reunite. There is no unified front so far: they have struggled to decide on the scale of assistance to devastated economies from the outbreak. The decisive intervention of the ECB offers them some breathing room but, as of now, lawmakers are quarreling about the creation of a credit line worth around 2 percent of the euro area bailout fund's annual production.


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