Current situation of World Economy Due to Corona Virus

A virus named Severe Acute Respiratory Syndrome CoronaVirus 2 (SARS-CoV-2) causes corona virus disease (COVID-19). It has recently spread from the Wuhan City in Hubei province of ChinaWHO[1] in the mid-January declared Global Health emergency because there is a chance of becoming pandemic if it is not contained. About 16% of the total World’s GDP is contributed by China. China is the 2nd biggest economy of the world, worth $13.6 trillion. Its position is just after USA.

Due to the infection of corona virus the multiple impact of epidemic development on the economy like that including the situation on financial markets. Over the past two weeks (end of February / beginning of March 2020), economic growth rate and financial markets the scale of sharp decreases 50% of their economic rate.


Impact of the coronavirus pandemic on the global economy[2]

Global COVID-19 it will have severe negative impacts on the global economy. Early estimates predicted that economies will lose at least 2.4 percent of the value their gross domestic product (GDP) over 2020, forecasts of global economic growth down from around 3.0 percent to 2.4 percent.


Forecasted percent change in (GDP) as a result of the coronavirus outbreak in 2020[3]

The impact that the coronavirus (COVID-19) outbreak could have on the economy depends on how the outbreak plays out. In a scenario that results in a global pandemic, it is predicted that the (GDP) of the United States will decline by 2.4 percent, and the Russian GDP will decline by 4.8 percent.


Change in value during coronavirus outbreak of selected stock market indices worldwide from January 1 to March 18, 2020[4]

Change in global stock index values during coronavirus outbreak in 2020. Between March 6 and 18, 2020, all major stock market indices lost value due to the coronavirus pandemic sweeping across the globe. The CSI 300 index in China lost 12.1 percent of its value during this period, whereas the FTSE MIB index in Italy lost 27.3 percent of its value.


The outbreak of COVID-19, the current forecast shows the IT industry growing by 4.3 percent in 2020 compared to the previous year[5]

IT spending growth forecast worldwide 2020, to adjust for Covid-19 impact. IT spending is projected to grow by 3.7 percent compared to 2019.The"pessimistic" scenario shows a growth of 1.3 percent in 2020.


Estimated number of vehicles lost due to auto plant stoppages shutdowns caused by COVID-19[6],

It was also estimated that China could suffer the loss of about 1.7 million vehicles worth of production due to coronavirus-related work stoppages. Auto plants in the city of Wuhan are estimated to produce around 2.2 million Honda and Nissan vehicles.

Oxford Economics has warned that Corona Virus could knock out $1tn output if it becomes pandemic. If the virus remains contained like now it would cause to lower global GDP growth by 0.3%. As many countries are suffering from the shortfall of supplies from China, the production in those country would get reduced they might suffer slight inflation. It might be an opportunity for new suppliers to take itself into the market as most of the countries would look to diversify its supply chain.


Impact of corona virus in Indian economy[7]

The coronavirus outbreak might cost the global economy $1-2 trillion in 2020, according to the UN Conference on Trade and Development. Its potential impact on the Indian economy is not yet known, but several sectors are already feeling the pain, here’s a look at the sectors most impacted by the outbreak.

1. Aviation: - 585 international flights cancelled by private carriers as on March 6

2. Hospitality: - 3. 35% fall reported in restaurant business cancelled.

4. Apparel: - 35% of apparel export orders come from Europe rejected.

5. Consumer Durables and Electronics: - 15% decline seen in mobile shipments in Jan-March closed.

6. Poultry and Seafood: - 30% fall reported in demand for chicken in the past three weeks

Conclusion:-

If the virus remains contained like now it would cause to lower global GDP growth by 0.3%. As many countries are suffering from the shortfall of supplies from China, the production in those country would get reduced they might suffer slight inflation. It might be an opportunity for new suppliers to take itself into the market as most of the countries would look to diversify its supply chain. As per my opinion, I would like to suggest that we have also to focus in these terms e.g. risk management procedures and systems have already been optimally improved, and now commercial banks needs the improvement of IT systems, cybercrime, data transfer on the Internet, and development of electronic internet and mobile banking. Because these are the basic part of the world economic. World economy depends on these sectors.


Footnotes:

[1] Coronavirus disease (COVID-19) Pandemic, World Health Organization , 12 March 2020 https://www.who.int/emergencies/diseases/novel-coronavirus-2020 [2] Erin Duffin, Impact of the coronavirus pandemic on the global economy - Statistics & Facts, Statista, 3 April 2020. https://www.statista.com/topics/6139/covid-19-impact-on-the-global-economy/ [3] Gaurav Noronha, Coronavirus outbreak will set back India’s growth recovery, Economic Times, 17 Mar 2020, https://economictimes.indiatimes.com/news/economy/policy/outbreak-will-set-back-indias-growth-recovery/articleshow/74663633.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst [4] Travis Hartman, Mad March: how the stock market is being hit by COVID-19, The World Economic Forum, 23 Mar 2020 https://www.weforum.org/agenda/2020/03/stock-market-volatility-coronavirus/ [5] Megha Mandavi &, Anandi Chandrashekhar, Coronavirus attack to slow down IT growth, Economic Times April 03 April 2020 https://economictimes.indiatimes.com/tech/ites/virus-attack-to-slow-down-it growth/articleshow/74956507.cms?from=mdr [6] Mahesh Kulkarni, Auto sector to suffer loss of Rs 21kcr due to plant closures amidst COVID-19 lockdown, DH Deccan Herald, 24 march 2020 https://www.deccanherald.com/business/auto-sector-to-suffer-loss-of-rs-21k-cr-due-to-plant-closures-amidst-covid-19-lockdown-817410.html [7] Vasanthi Vara, Coronavirus in India: how the COVID-19 could impact the fast-growing economy, Pharmaceutical-Technology, 16 APRIL 2020 https://www.pharmaceutical-technology.com/features/coronavirus-affected-countries-india-measures-impact-pharma-economy/


Submitted by,

Abhay Kumar & Alisha Singh,

B.A.LL.B.,

Lloyd Law College.

© 2019 by AmicusX