Surveys say the coronavirus pandemic is crippling the global economy.
Several nations from around the world are suffering from the coronavirus paramedic. It has affected millions of people of all ages and the mortality is going up every single day owing to the disease. This flu-like virus has taken the world over and in addition to the widespread suffering of mankind, the global economy is being crippled substantially
According to the Economic News, there is a 4% contraction in the economy and it is estimated that the percentage will only go up. With no visible vaccine for the medical condition and the number of infected people increasing alarmingly, the situation continues to be crucial. Though nations are taking all the necessary precautions to curtain the spread, measures such as lockdowns, etc. are affecting the stock market and the global economy as a whole. The whole world is looking at how coronavirus can impact the economy in the short and long run and the uncertainty factor is something that cannot give us a clear picture of the future.
According to the world economic growth forecast and reports based on sources from various countries, there are many reasons that have given rise to these circumstances. Here are a few important ones that have impacted the most:
Increased costs - Owing to the lockdowns, curfews, etc, establishments are unable to transport their goods from one place to another. This leads to a limited stock at any given point in time. With a shortage of goods of all kinds (consumables, FMCG, electronics, etc.), there is a steep rise in the costs.
Since people are left with no choice than to shop for any goods that are available nearby, they have to bear the outcome of limited stocks. As a result of this, consumers are left with lesser money than before and this leads to a higher inflation rate. This impacts the cost of living as a whole. Businesses have to spend more, people resort to borrowing money and every aspect of the global economy is affected.
However, with a lowering of the interest rates against borrowing, loans are not as accessible as they were before since banks are being careful about them. They are only encouraging those applications which have higher chances of repayment and are thereby reducing the number of disbursements.
Halt in production - As mentioned above, almost all the countries affected by the coronavirus have announced lockdowns in order to maintain social distancing. This has resulted in nil labour and ultimately, halt in production. Every industry is in a crucial stage owing to this. Though there is no production, it still has to take care of the overhead and infrastructure costs and salaries, etc. With no income for an uncertain period of time, this can also lead to them mortgaging their respective businesses and taking loans for basic maintenance.
Skeptical investors - In times like this, many investors are not comfortable with putting their money in other ventures. With low-interest rates against borrowing, banks are not as forthcoming as before when it comes to business loans and most of the VCs (venture capitalists) are not keen on undertaking new projects as well. Therefore, entrepreneurs have to wait to get started with their respective ideas. The ones that are established also need the help of investors for their growth and their absence is bound to reduce their returns substantially.
Job cuts - A large number of businesses and industries are being affected by global shut-down. Take the example of airlines, railways, production, etc. In order for them to stay afloat, they are cutting down jobs. This recession has led to many people from around the world losing their jobs and subsequently, the global economy has to pay for it.
Since the governments of all countries are focussing their attention on curtailing the coronavirus pandemic, this recession period is bound to greatly affect the global inflation rates and it may take a few years to recover. There are currently no updates on businesses getting back on their respective feet and one can only hope that the pandemic will cease to exist in the near future.