As of 22nd April 2020, with more than 2 million people infected globally by the novel coronavirus and more than 127,000 people dead, the SARS-COV-2, which causes the COVID-19 shows no signs of abating. The coronavirus pandemic continues unabated wrecking a negative impact on the world economy, crude, the stock exchange, and the common man.
That’s almost about 4 months after it was discovered, in spite of strict lockdowns being enforced and one-third of the world’s population under some form of restriction.
As the vaccine is yet to be discovered, lockdown, personal protection equipment (PPEs), and social distancing remain the only ways to prevent the spread of the virus.
However, lockdowns mean the closure of all commercial activities and industries, which has a tremendously adverse effect on the economy.
- As lockdowns are being enforced in most countries across the globe to prevent transmission of the coronavirus, financial and job losses are the first fallout of the impact of the virus on humanity.
- Not knowing the direction this pandemic will take also has an effect on our economic, physical and mental well-being;
- Because of this fear, businesses and communities in many regions are being cautious and have shown disinterest and a rather selfish attitude, which otherwise could have helped countries fight the COVID-19.
- COVID-19 is on the decline in China. The lockdown in Wuhan has been lifted showing that it has been given a clean title.
- There are now more new cases emerging every day in Europe than there were in China even at the epidemic’s peak.
- Italy is the worst affected country with the most number of deaths from this virus.
- In 67 days, the first 100,000 were confirmed worldwide. In the next 11 days, the figure rose to 200,000 and in another 4 days, 300,000 confirmed cases were reported from around the world.
Impact on crude oil
- The demand for oil has fallen drastically and amid the fight between the OPEC countries and Russia, the Coronavirus aftermath has ignited the fall of crude prices. As of 21st April 2020, the price of crude oil has fallen below zero and has gone into negativity. As on this date, May futures for US crude oil WTI fell to minus $37.63 a barrel level. A negative price means that sellers are willing to pay buyers to take deliveries because the incurring cost of storage is high.
Impact on economy
- The global economy has come to a standstill. According to Gita Gopinath, the IMF’s economic counselor, “It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. ‘The Great Lockdown’, as one might call it, is projected to shrink global growth dramatically.”
- The IMF’s World Economic Outlook (WEO) has envisaged three possible outcomes: the lockdown of 2020 lasting much longer than forecasted; a resurge of the novel coronavirus again in 2021; the possibility of a longer-lasting pandemic and the consequent longer containment in 2020 and a resurgence of the virus in 2021.
- · In such a gloomier possibility, the global economy would shrink by around 11% rather than 3%.
Impact on stock markets
- The economic fear caused by the Coronavirus together with the Russia-Saudi Arabia oil price war have thrown global stock markets into a frenzy. In just weeks, the Coronavirus pandemic has taken away one-third of the global market cap.
- The major global stock markets registered the greatest single-day fall on March 12, 2020 – the biggest since the 1987 stock market crash.
- That’s when the markets started to panic. Panic selling starts a vicious cycle – people start selling, nobody buys and therefore, supply increases. Prices start falling, which ultimately leads to more selling. And, that’s how the downward spiral accelerates.
- When the threat of the Coronavirus is under control and the lockdowns are lifted, various Governments will announce economic stimulus packages, which will certainly help improve the market conditions.
How the common man has been affected?
Financial markets and susceptible industries such as manufacturing, tourism, hospitality, and travel have taken a big hit.
Tourism and travel account for 10% of the global GDP providing jobs to 50 million people worldwide, which are being lost.
Closure of travel, tourism, and hospitality companies have adversely affected small to medium scale enterprises throughout the world.
The worst-hit are the employees at the lowest rung and those working on a contract basis.
Many countries have yet to announce effective measures on how to tackle this grim situation.