Within the span of hardly two months of the coronavirus outbreak, the world has suffered more than 2200 deaths and 76,000 cases diagnosed in multiple countries.
2020 hasn’t been the greatest year so far – with Australian bushfires, the war with Syria and now the virus. It’s safe to say that some countries were hit harder than others:
Outside of China, Italy, Japan and Iran have seen the worst possible outbreak – with more than over 1000 cases and total lockdown of public spaces. 4 more deaths were reported in the US today, bringing the total to 6 deaths and 84 confirmed cases.
Neighboring countries have been forced to seal borders in order to contain the spread of the disease and governments are scrambling to protect their citizens from an epidemic that has never been seen before, but without a vaccine, the virus continues to spread.
So how does this affect the global economy?
China has reported 125 cases in the past week compared to 202 cases the week before that, and while this number continues to decrease each week, the global economy has already taken a hit.
Ever since the World Health Organisation (WHO) declared the coronavirus outbreak a global health emergency, the first industry to see an impact was aviation.
Countries including the UK, Pakistan, Kingdom of Saudia Arabia and others temporarily suspended flights and warned citizens against traveling to China.
Even countries with outgoing flights saw a sharp decline in the number of passengers traveling as fear of the coronavirus outbreak spread and thus; airlines were forced to cancel flights to China.
Fast-forward to one month later and the virus has spread in 27 countries so the threat of contamination could come from anywhere.
Pakistan saw its first case contracted from a man with a travel history to Iran. Thus, all flights were canceled to Iran as well.
Countries like the UAE are barring entry for passengers on arrival if they show any symptoms of the virus in order to contain it; hence, further discouraging traveling.
Now let’s take a look at an industry that suffered huge losses due to the coronavirus outbreak.
Effects of coronavirus outbreak on global trade
China’s economy accounts for 4.6% of the world’s GDP and it is a major player in global trade, sourcing raw materials to a number of industries which is why the virus outbreak has halted the production of finished goods.
Apple is one such example. The trillion-dollar tech giant manufactures the majority of its phones in China as it enjoys cheaper production costs in the country.
However, due to the outbreak, not only the supply of phones is halted due to factories being closed down but the demand is also down as the 42 retail stores in China remain closed as well.
This has had a direct impact on profitability as the company’s shares dropped by 3.2% in the trading market last week.
Production is slowly regaining as China is reopening factories but the process is still underway and the company has witnessed a huge drop in sales as the company remains exposed due to the uncontrollable macro-environmental factors.
Other countries that faced stunted production and growth include Japan as the country sees an influx of Chinese tourists as well as exports to China. Germany witnesses stunted growth and Europe’s already weak market is at the brink of collapsing.
Toyota, Honda, and other automotive companies cut down production of vehicles meanwhile Ikea and Starbucks temporarily shut down outlets. If the virus continues to spread and turn into a pandemic, it could cost the global economy about $1.1 trillion in losses.
Ali Express, one of the biggest e-commerce giants in the world, has halted production and worldwide delivery as the virus is suspected to transmit through parcels and goods as well. Companies and educational institutions in China, Singapore, UAE, and Italy have temporarily shut down their physical workplaces as some institutions continue work and classes online to minimize the impact on the economy.
The oil industry also faced a huge slump as China remains one of the biggest oil importers in the world. Demand is expected to fall by 435,000 barrels, the lowest number in the past decade.
Luxury products saw a steep decrease in demand, forcing brands like Burberry to close one-third of its outlets in Mainland China.
The problem is, a disruption of trade and economy in China is plunging the entire world’s economy into recession. China purchases more than one-quarter of US soybeans and Australia’s mining industry that employes more than 200,000 workers depend heavily on China.
China itself is in a highly vulnerable position due to the outbreak – as Raphie Hayat, senior economist at the Dutch Bank, says:
“China has much higher debt, trade tensions with a major trading partner and its growth has been steadily slowing down for a number of years, which gives a weak starting point to face such a crisis”
With this, we see the first major drawback of globalization in the modern world.
The economic impact of the virus on the average citizen
Global news channels like CNN, BCC, and NBC were sending in their reporters to China for updates on the virus situation before authorities locked down many parts of Mainland China.
However, they continued to do their job to provide daily updates to citizens all over the world. The New York Times interviewed Mr. Battogtokh, a coal mine worker who transports 70 tonnes of coal via trucks from the Gobi Desert to the Mongolian-China border.
With the high demand for the job, Mr. Battogtokh earns good money, making as high as $1000 on months when business is good. Unfortunately, Mongolia closed its border with China at the very start of the outbreak in January.
This forced Mr. Battogtokh to get bank loans worth $7300 in order to pay off the loan on his truck. Unfortunately, this was the last of the money that he had to support his two children, both under the age of 10.
Many coal miners are still driving trucks to the border in the hopes of finding buyers as working-class citizens are desperate to make a living. With no decent jobs and complete economic shutdown, they are facing severe difficulties in making ends meet and providing food for their families.
Chinese citizens residing in other parts of the world also faced heavy economic losses. During the Lunar New Year celebrations when the virus first broke out, Chinese restaurants in Chinatown, New York remained empty as customers canceled reservations for fear of contracting the virus:
Chinese taxi drivers in multiple countries faced discrimination as majority customers refused to book rides for fear of the virus. This shows how the virus affected not only countries and trade but also the income and livelihood of an average Chinese citizen residing in any part of the world.
How countries are fighting back
Unfortunately, no source can confirm the future outlook of the coronavirus outbreak. On one hand, governments are preparing to tackle a situation where trade and life as we know it comes to a halt. On the other hand, many are confident that it is just a matter of time until life returns to normal.
In any case, countries and banks have taken measures to minimize the economic impact. The People’s Bank of China cut down interest rates and injected money into the market in order to ease the pressure on banks and borrowers.
Apart from that, new subsidies and tax breaks were announced to aid consumers and help businesses to cut down on losses. Other schemes are underway to prepare for more relief in case the virus continues to spread.
Other countries including SriLanka, Thailand, Philippines, and Malaysia also followed suit and cut down interest rates to provide relief as lockdowns restricted business activity which meant no income for consumers and businesses.
Unfortunately, these measures are taking a toll on countries’ reserves and debts. The European Central Bank and the Bank of Japan introduced negative interest rates in 2014 which they have not been able to increase ever since, with the outbreak worsening the situation.
Similarly, the US Federal Reserve cut interest three times in 2019 and debt levels are on the rise in the US. With that being said, the world is now drowning in debt, according to CNN.
What we need to do in the long run
With increasing globalization and trade, countries will have to come up with mutually beneficial trade agreements and contracts that minimize losses incurred by the outbreak.
However, many experts are saying that the coronavirus outbreak is a small part of a much larger picture. This is seen by the recurring pattern of global epidemics over the course of centuries.
The SARS virus emerged in 2003, causing respiratory failure and pneumonia. The outbreak infected more than over 8000 people with a mortality rate of 10%. In 2012, we saw the MERC virus – similar to SARS but much more deadly, killing 30% of humans infected. 8 years later, we see a similar species called the coronavirus or COVID-19 which has infected a much larger part of the human population.
The recurring pattern that we see is the same disease becoming more resistant to modern medicine and re-emerging stronger each time. Earthling Ed, the vegan educator, and public speaker believes that humans are to blame:
The fact of the matter is when we inject animals and our own bodies with multiple and unnecessary antibiotics, our immune system becomes weak; thus, making us more vulnerable to disease-carrying pathogens.
How can we fix this? As aware and educated citizens, we must only intake antibiotics when absolutely necessary. However, there needs to be a global change in the treatment and nurturing of farm animals that are fed antibiotics every day in order to boost growth so that more food is produced for humans.
Until these practices are reversed or changed, it is impossible to see a change. By not looking at the bigger picture, we expose ourselves to the risk of diseases that we cannot fight off in the long run.
While scientists are positive about developing a vaccine for the coronavirus, it could take up to 12-18 months. By that time, the virus could potentially affect the global population and economy drastically which means that prevention should be the top-most priority of governments.
Underdeveloped and developing nations like Iran do not have the medical and financial resources to diagnose and treat the virus as effectively as developed nations. Pakistan is currently importing testing kits whereas Iran faced the highest mortality rate of 16% last week; thus, raising suspicions about how the government is handling the situation.
In conclusion, the aftermath of the virus is completely unknown. We need to take the necessary steps as responsible citizens, cities, and nations to protect the people around us in order to ensure minimal impact and fight off the disease.