Covid-19: What It Means for the Economy?
2020 has started with Coronavirus Covid-19, which originated in Wuhan, China, becoming a pandemic. This fact creates a lot of threat to the world’s economy, with a high chance of falling into a recession.
Because of the economical interdependence, the world is vulnerable to an outbreak. We are connected to almost any part of the globe as never before. Globalization influenced our dependence on different economies, people, and cultures. This interflow between different nations, including investments, trade in goods and services, technology, etc. is essential for global wealth. So what happens when a pandemic like Covid-19 comes and interrupts this flow?
There are many ways Coronavirus is affecting national economies, but the biggest harm, of course, lies in the tourism industry. Countries like Italy, whose economy relies mainly on tourism, are threatened to have a drastic and irreversible drop in the inflow of people, even after the pandemic. Many countries may face an economic slowdown. In China, uncertainty for foreign investors and unrest in society, the medical and public health sector already has consequences. The fear of being infected results in less oil consumption in China and Arabic countries. Accounting for about 25% of the global manufacturing capacity, the fact that China’s economy might drop means there is a high chance of recession.
It doesn’t stop there. From today on, most of the countries are on the lockdown without any possibility to cross borders for anyone other than the citizens (which is also temporary). This will have a crucial effect on the world’s supply chains as most of the countries rely on foreign suppliers.
Is there anything good we can derive from this situation? Well, there is also a chance that the major changes in buying behavior, like switching to online shopping, and the industry will facilitate countries to adopt new technologies and business models. An example of such is the creation of the online giant Alibaba, which was developed during the 2003 SARS outbreak in China.