Question

Explain, discuss and analyse the impact of Covid-19 (Corona virus) on the macroeconomic situation of any selected country. Use over 1000-1500 words.

Answer 1

The country selected is United States

When the novel coronavirus (COVID-19) rips through the biggest cities in America, its impact is felt far beyond the more than 140,000 Americans believed to be infected. The quarantines and lockdowns needed to counter the spread of the virus are also freezing the economy with unparalleled force and pace. Last month, the stock market sank a quarter from its peak, wipping off three years of gains. Consumption accounts for 70 per cent of America's gross domestic product (GDP), but consumption has declined as companies close and households hang on to big purchases while they worry about their finances and employment.

Investment accounts for 20 per cent of GDP, but companies are postponing investment as they await clarification on COVID-19 's full expense. Art, sports, recreation, and eateries make up 4.2 percent of GDP. This number will now be closer to zero with restaurants and movie theaters closed before the quarantines are lifted. Manufacturing accounts for 11 per cent of the United States. GDP, but all of that will be affected, too, as factory closures have obstructed global supply chains and businesses are closing down plants in expectation of decreased demand. For example, Ford and GM announced temporary closures of the automobile factories.

Lay-offs have also emerged as companies rack up losses due to closures. In particular, small companies will struggle to retain workers on the payroll as their profits fall. Countries like Germany are taking steps to help corporations prevent layoffs and it would be prudent for the United States to do so too. The U.S. Congress passed a huge stimulus bill that includes hundreds of billions in additional investment, extending unemployment benefits, and offering cash handouts to low- and middle-income Americans that will help lay off employees to make ends before the economy begins improving.

One main danger is the number of companies being forced to close during the lockdowns. The higher the expense of the crisis would be the more company losses – and the more jobs that follow. Unemployment will grow, and the higher it rises, the less likely demand will be to rebound immediately after the end of the lockdowns The other big risk to the economy is that a financial crisis will follow the health crisis. COVID-19 's immediate adverse impact on GDP is expected to be far greater than the subprime crisis of 2008. Its financial consequences can decide the amount of time that the COVID-19 crisis hangs over the economy.

Because of the huge financial disruptions that resulted, the 2008 crisis caused many years of slow growth as banks suffered losses and as a result cut back on lending – usually a key driver of growth. It is easy to imagine ways of having a similar financial impact in the COVID-19 crisis. The default on loans would be for companies and customers alike. Financial markets also expect the default rate to rise for large companies. American banks today are better capitalized than they were in 2008—so they've got more of a margin to take on losses. However, as losses escalate, government intervention may be required to restore credit markets

The lesson of 2008, and of the Great Depression, is that the only worse thing than a bank bailout is a bank panic, whose costs are incurred not just from banks but from their customers as well. The Federal Reserve has already stepped in to give financial markets more liquidity, but it will need to do more to keep the credit open to businesses and individuals. Scenarios can be imagined in which a rapid economic recovery follows the COVID-19 quarantines. Before the virus hit, the economy developed steadily and there are no other factors driving. Yet the longer the last shutdowns, the less likely it would become.

Holding the stunning situation in mind, the G-20 nations called for an emergency meeting to discuss deteriorating circumstances and prepare a plan to tackle Covid-19 as losses could be minimized. The epidemic spread is gathering speed and causing more economic damage. The U.S. federal reserve official estimates that American unemployment would be 30 percent, and that the economy would decline by half. When looking at the current situation of many companies, most investors are withdrawing their capital from several companies in this regard, after the Covid-19 outbreak $83 billion has already been withdrawn from emerging markets.

So, Covid-19 's effect on the world's economic system is serious because people don't spend money, so businesses don't get income, so most businesses shut down shops. Most nations are experiencing recession and collapse of their economic structure, pointing to the staggering conditions that nearly 80 countries have already requested financial assistance from the International Monetary Fund ( IMF).

There are various markets and economies that tend to be most vulnerable due to this pandemic, such as the epidemic has impacted both demand and supply as a result of depressed operation Foreign Direct Investment flows may drop between 5% and 15%. In addition, the most impacted sectors have become vulnerable, such as tourism and travel-related industries, hotels , restaurants, sporting events, consumer goods, financial markets, transportation, and health system overloads.

Firstly, to continue with essential containment measures and health system support. Second, shield impacted individuals and businesses with broad, prompt, targeted fiscal and financial sector behavior. Third, reducing financial system stress and avoiding con tangent. Fourthly, recovery plan must be pursued and the future scary consequences of the crisis must be reduced by legislative action. Regarding the extreme and deteriorating situations all over the world, nations need to collaborate and organize among themselves, including support and education, as well as people's sensitive actions to fight Coronavirus effectively.

Otherwise, due to the globalized and connected world, any State's wrong actions and policies will leave a serious impact on other countries as well. This is not the time for political point-scoring and battling with each other, but it is high time that states collaborate, organize and help each other solve this deadly pandemic in order to save the global economic and financial system first.