The global crisis caused by the novel Coronavirus continues to surprise us every day while the number of new COVID-19 confirmed cases is now counted in thousands of people per day. While China is recovering, Europe and the US are going through the crisis and struggling to control the situation. Of course, health comes first, and right now, the priority is to save as many lives as possible. However, we cannot avoid noticing that our world has basically stopped, and the burning question is, how will the global economy recover from this?
Coronavirus From an Economic Perspective
A total lockdown like the one that happened in Wuhan, China, or in Italy, seems to be the best way to stop the virus from spreading, but at the same time, it is causing significant damage to the local and global economy. Shutting down companies, factories, transportation, and pretty much everything that is not essential to function during the state of emergency is what is going on right now. There are no other alternatives to stop the virus from spreading. Stock markets are already plunging, and currently, everything is possible.
Economic Forecasts
All banks, institutions, and financial experts are now downgrading their forecasts for 2020. China, the country that so far seems to be slowly recovering from the crisis and will soon continue with normal life, has the largest downgrade of its gross domestic product, in terms of magnitude. The initial forecast was that their economy would grow around 5.7% this year, but most likely it will be 4.9%. On a global level, expected growth has downgraded for 0.5%
Manufacturing Sector
Manufacturers were struck by this crisis, especially because a lot of small manufacturers were forced to close their businesses temporarily or even permanently. In fact, the slowdown of manufacturing in China was so significant that it impacted other Asian economies that were not dealing with such a crisis at a time, in terms of the virus.
Services Sector
Needless to say that in times when people stay at home for weeks, services are suffering as well. Retail stores, restaurants, shops, and even aviation all lead to the point where China’s PMI index dropped below 50 for the first time since this survey started 15 years ago. In the world’s largest consumer market, the US, consequences are also visible, but still not so significant since the US is still expecting the peak of the epidemic.
Oil Market
We are witnessing a global slowdown in all fields of activity. Therefore the demand for oil was never lower, and the prices dropped significantly. No one can tell how big the full impact will be since the situation changes daily. People are no longer moving around, and the demand for transport fuels is lower than usual, but we will have to wait for this all to end to be able to see the final numbers.
Stock Market
Stocks are also going down, and this has been the worst week for Wall Street since the financial crisis in 2008. The dollar also weakened, and there is a fear that the scenario from 2008 will repeat. Since just like then, the stimulus package was also delayed. One thing is sure, the market won’t stabilize before the Coronavirus crisis ends.
When and How Will Global Economy Recover?
Some predictions claim that the world will need years to recover from the Coronavirus impact and its consequences on global economics. The economic shock right now is too big, and we can expect either no growth or negative growth. The main problem is that no one knows when we will be able to start fixing this situation because no one knows when this will be over, but we are probably talking about weeks or months. Too many people already lost their jobs, and the unemployment rates will continue growing. Thousands of small businesses are suffering, and it will be hard to repair all the damage.
‘V’ Shaped Recovery
‘V’ shaped recovery would mean that after a fast and sharp downfall comes an equally fast rebound, but unfortunately expecting such a thing right now would be too optimistic. The recovery we are looking at would be ‘U’ shaped, with a long term recovery, for a long time the economy will be at the bottom before it starts rising again. There is also the worst-case scenario, which would be the ‘L’ shape, but we can avoid that if we make the right decisions.
Coronavirus, the Most Powerful Force Today?
It seems that COVID-19 managed to do something that once seemed unbelievable, showing us how fragile and vulnerable our system can be. Right now, Coronavirus is writing our history, not just in terms of global economics, but everything else as well. It managed to close borders, shut down factories and companies, lock people in their homes for weeks, and yet the end is not near. We have to be patient, and wait and see how our future will look like after Coronavirus, and how it redefined the global economy.
