Question

Coronavirus: A visual guide to the economic impact  

Global shares take a hit
Big shifts in stock markets, where shares in companies are bought and sold, can affect many investments in pensions or individual savings accounts (ISAs).
The FTSE, Dow Jones Industrial Average and the Nikkei have all seen huge falls since the outbreak began on 31 December.
The Dow and the FTSE recently saw their biggest one day declines since 1987.

Investors fear the spread of the coronavirus will destroy economic growth and that government action may not be enough to stop the decline.
In response, central banks in many countries, including the United Kingdom, have slashed interest rates.
That should, in theory, make borrowing cheaper and encourage spending to boost the economy.
Global markets did also recover some ground after the US Senate passed a $2 trillion (£1.7tn) coronavirus aid bill to help workers and businesses.
But some analysts have warned that they could be volatile until the pandemic is contained.

In the United States, the number of people filing for unemployment hit a record high, signalling an end to a decade of expansion for one of the world's largest economies.
  


Factories in China slowed down
In China, where the coronavirus first appeared, industrial production, sales and investment all fell in the first two months of the year, compared with the same period in 2019.
China makes up a third of manufacturing globally, and is the world's largest exporter of goods.


Restrictions have affected the supply chains of big companies such as industrial equipment manufacturer JCB and carmaker Nissan.
Shops and car dealerships have all reported a fall in demand.
Chinese car sales, for example, dropped by 86% in February. More carmakers, like Tesla or Geely, are now selling cars online as customers stay away from showrooms.

Growth set to stagnate
If the economy is growing, that generally means more wealth and more new jobs.
It's measured by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year.
The world's economy could grow at its slowest rate since 2009 this year due to the coronavirus outbreak, according to the Organisation for Economic Cooperation and Development (OECD).

The think tank has forecast growth of just 2.4% in 2020, down from 2.9% in November.
It also said that a "longer lasting and more intensive" outbreak could halve growth to 1.5% in 2020 as factories suspend their activity and workers stay at home to try to contain the virus.

Questions:
1. Elaborate the impact of this Covid-19 from the article. [30 marks]

Answer 1

Covid-19, an infectious disease, is caused by a newly discovered coronavirus and can be transmitted from one human to another. A number of countries have been impacted by this virus. The vaccine of this disease is yet to be discovered. This virus has not only affected humans but also, economies of a number of the countries in the world. This virus has caused an economic slowdown throughout the world. Even developed countries have not been able to escape themselves from the vicious cycle of this virus.

Global stocks have started to slump as investors, along with potential investors, have been losing faith in the global stock market. FTSE, DAX, KOSPI, Nikkei, Dow Jones, etc. have gone down like never before. Oil prices witnessed a historic crash. Poor economic data is a result of investors’ concerns regarding the working of stock markets.

The central banks in various countries have reduced the interest rates being offered on the deposits. The main reason behind such decrease is to increase the money available to the government, in order to be prepared for the upcoming times when a likely cure would be discovered and whose purchase would require outflow of money. Moreover, the money is also being utilized to import important medicines and prepare PPE kits. Also, the long term effect of such decrease in interest rate would imply that people would save less and spend more, which will boost the economy. This boost would be an important aspect in normalizing the economy as it was before this pandemic.

A lot of people in the US have applied for unemployment benefits. Shutdown of factories and businesses has made people jobless and they are now being dependent on government for financial aid. The biggest cities of the US, including New York, are now seeing a major increase in the number of unemployed people.

China is the world’s largest exporter of goods and a lot of countries are dependent on China for a number of durable goods. China, where coronavirus took place for the first time, is going through factories slow down. Supply chain refers to the process of supplying or delivering goods/services to the ultimate consumers. Capital goods market is going through a downward phase because of fall in the demand for capital goods. Many of the carmakers are now trying to sell cars online rather than showrooms but it is quite difficult to sell cars online as these goods are generally bought after physical inspection.

A number of analysts have conducted various quantitative analysis to calculate the expected change growth rate of the economies of the world. It is expected that the economy will start to balance itself by the end of 2020 but the real growth would be witnessed by November 2021. However, it is difficult to check the accuracy of such predictions because a lot of study around this virus is still taking place.