Question

What do you believe will be the consequence of the coronavirus pandemic on our financial system? What will happen to our Private, Public, and National saving? Explain and provide an example.  

Answer 1

Coronavirus pandemic have speedily spread it's effects on various different factors nearly in all over the world . Current situation shows adverse effects on GDP & other types of index related to economy . Banking sector  is one of the most important part of economy which directly effects on Majority common people . global recession was already arriving before corona virus pandemic . So Many people took loan form banks to start business . But after implying lockdown in many countries , maximum businesses got collapsed due to which people are unable now to repay the loan . Its difficult for such people to run their daily needs & other expenses . In some countries though government had declared instructions for banks to not to force clients for repay for few months , many private banks keep calling to clients for their installments after the few months . But these common people have enough earning to pay installments . This is the ground reality . On the other hand , the demand of vehicle loans & property loans is increasing . This is a ray of hope for banks in present situation .   

There would be following Consequences on financial system -  

1] National GDP & Growth rates in nearly all over the world will be continue to be affected for at least few years as COVID-19 19 second wave is predicted to be more powerful than the previous .

2] Automobile sector have to face problems related to production & transportation & taxation .

3] Governments are suffering from huge revenue loss due to collapse in businesses & industries income . It may take some countries into debt . the only few sectors are favorable to governments for revenue such as pharmacy sector , health care sector .

4] The big transport & supply chain got affected which will continue to decrease in international trade . And finally it may result into fall of international currency exchange rate of many countries .

5]   The healthcare & pharmacy sector companies will be in more profit . As we know the fact that due to the influence of this sector on Medical council & organizations , if this sector got monopoly on market in many countries , it can manipulate government's health policies which may not be beneficial for common people.

6] The above expected consequences will continuously increase in unemployment for At least few years . this will deeply affect the both Profit economics & welfare economics at global level .

Private , public & National saving -

The COVID-19 vaccine is expected to come after two years . And  As National saving is related to public & private saving , It will be a huge tax revenue loss in these all factors . Many MNCs , medium & small companies will be   facing losses for few years . In some developing & under developed countries , public or service sector is badly affected .  

For example , In a high populated & economically emerging  country like India , Central & state governments are  not  able to pay employee's salary regularly in various departments . And this situation is to expected to continue for few years .

Governments have started to spend from it's reserve fund to recover their economies including loan taken from IMF & World Bank . If loans not refunded  in future by governments , Nations may go in debt .