Question

Write a response on this article explain the effect of the corona virus pandemic on the economy in general and foreign direct investment (FDI) in particular using the discussions in the macro model developed, among others, a definition of FDI, a summary of the involvement of U.S. in FDI (on both directions as a source and destination country), and a discussion of the expected economic effects of FDI, and the observed and expected impact of the pandemic on FDI and other economic activities in U.S. and the global economy as well as implications for businesses and managerial decision making, concluding with your thoughts.n

Answer 1

Corona virus led to disruption of manufacturing output, foreign travel and consumer demand. There is a huge supply side fall can be seen during the pandemic. The uncertainty regarding the travel plans and staying off people in home reduce the income level and leads to fall in demand. Almost 40 percent fall in global GDP due to the pandemic. The strict quarantine measures and the staying off home policies will help to reduce the spreading of the virus, but it badly affect the growth in manufacturing sector. There is a huge fall in its production and productivity. The unavailability of the inputs for manufactures makes supply bottle necks and reduction in its growth rate. The uncertainty remains in the economy leads to fall in confidence level of the consumers and producers cause fall in investment rate. There is huge fall in demand can be seen in travel and tourism sector. The scope for monetary policy also reduces. In Western Europe and Japan, there is limited scope for the cutting of interest rates. There is prolonged period of stagnation remain in the economy.
COVID19 have high impact over the globalisation with a disruption in foreign direct investment (FDI). Since the beginning of the pandemic IMF removes 83 billion USD from developing countries. There is contraction of FDI in consumer cyclical like airlines, hotels, restaurants and other leisure activities and energy sector. The increasing FDI in developing countries underpinned the rise of off shoring and global fragmentation in economic activities. The drop of FDI affects the global supply chain. There is a huge reduction in export revenue of developing countries. At the same time, this reduces the employment rate, infrastructure development and also technology transfers. FDI flow from most of the economies like US were stunted and this affect the developing countries with scarcity of the financial support and assistance.