The World Health Organization (WHO) first announced COVID-19 as a world health crisis in January 2020. Since the virus was first diagnosed in Wuhan, China, it has been actively discovered in over 190 countries.[1] In early March, the point of convergence of infections transferred from China to Europe, especially Italy and Spain, but by April 2020, the virus was all over in the United States as well, where the number of cases kept accelerating. The disease has relapsed more than 3.2 million people around the globe, about one-third in the US, with thousands of casualties. More than 80 countries have sealed their borders to arrivals from international states with infections, ordered businesses and companies to close, instructed their populations to self-isolate, closed schools to an estimated 1.5 billion children and many have even declared nation-wide lockdowns.[2]
The breakout of this fatal pandemic all over the globe has unsettled the social, economic, political, financial and religious systems structures of the whole world. The World’s leading economies such as the UK, US, China, Germany, France, Italy, Japan and many others are at the brink of disintegration. Besides, Stock Markets around the world have been thumped[3] and oil prices have fallen off a cliff.[4] In just a week 3.3 million Americans reported for unemployment and a week later another 6.6 million people started looking for jobs. According to an April 8, 2020 forecast by the World Trade Organization (WTO), global trade volumes are predicted to decline between 13% and 32% in 2020 as a result of the economic impact of COVID-19. The WTO also explains that the effect on global trade volumes could even exceed the drop in global trade during the peak of the 2008-2009 financial crisis.[5]
Also, many economists and experts on financial affairs have alerted about the aggravating state of global economic and financial framework. For instance, Kristalina Georgieva, Managing Director of International Monitory Fund (IMF), elucidated that “a recession at least as bad as during the Global Financial Crisis or worse”.[6] Furthermore, Covid-19 is degrading the global economy because the world has been encountering the most gruelling economic circumstance since World War-II. Taking into consideration the human cost of the Coronavirus pandemic it is unfathomable, therefore all countries should come together and work with collaboration and association to safeguard the humans as well as curb the economic injuries. For example, the nationwide lockdowns have restricted several businesses so as to contain the virus from travelling. Consequently these business are coming to an abrupt halt globally and thus, damaging the global economy.
The pandemic emergency is daring governments to execute monetary and fiscal policies that help credit and stock markets and assist economic activity. In doing so, however, these policy strategies are exhibiting differences between nation states that encourage nationalism against those that ask for a harmonized international reaction. They also are strengthening policy differences between developed and developing economies and in Europe between northern and southern members of the Eurozone.
Contemplating the flabbergasting situation G-20 countries called for an emergency conference meeting to talk about deteriorating conditions and formulate a plan to fight against Covid-19 to reduce the losses. The expansion of the pandemic is speeding up and resulting in more and more economic fatalities every day. It is mentioned by the U.S. official from federal reserves that American unemployment might rise to 30% and its economy might shrink by half. As for as the jobs of common middle class people are concerned, there is also an actual threat of losing their jobs because with business closing down it shows that companies and industries will not be able to pay remuneration to workers due to which they will have to lay off them. Also regarding the stock market, it has been severely vandalized by Covid-19 for the stock market of the US has moved to a lower position being down by about thirty percent.[7] By looking over the subsisting state of various businesses, many of the investors are removing their money from numerous businesses. In this regard $83 billion have already been withdrawn from emerging markets since the fallout of this deadly virus. So, the effect of Covid-19 is acute and critical on the economic system of the world because people are not expending much money. Resultantly businesses are not getting sufficient revenue and thus, most of the businesses are closing down.
It has also been observed that the economic revival from this deadly disease is only possible by 2021 because it has given severe blows to the international economy and the countries are facing several difficulties to bring their respective economies back to a steady state. But even the estimates of the expected recovery in 2021 are correspondingly debatable, with consequences depending greatly on the time span for which the epidemic lasts and the efficacy of the policy reactions.
“This crisis is first and foremost a health crisis which has forced governments to take unprecedented measures to protect people’s lives,” WTO Director-General Roberto Azevêdo explained. “The unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself.”[8]
Most of the countries are experiencing stagnation and subsidence of their economic composition that highlights the deteriorating conditions they have been going through. In this regard approximately 80 countries have already applied to International Monetary Fund (IMF) for seeking financial help (E.g.: Prime Minister of Pakistan Imran Khan also requested IMF to help Islamabad to fight against Novel Coronavirus). Moreover, there is unpredictability and unreliability concerning the growth of Coronavirus. So, the Organization for Economic Cooperation and Development (OECD) stated that global growth could be cut in half to 1.5% in 2020, if the virus continues to spread.[9] By now, most of the economics experts have already predicted about the recession to occur because there is no certainty and as of yet no one knows about how far this pandemic will fall and how long-lasting and crippling its effects would be. Besides, Bernard M. Wolf, professor, Economics Schulich School of Business, commented that “it is catastrophic and we have never seen anything like this, we have a huge portion of the economy and people under lockdown that’s going to have a huge impact on what can be produced and not produced”.[10]
As Covid-19 has already been realised to be the dangerous cause behind shutting down of several businesses and closure of supermarkets and malls many experts and economists are panicked and have predicted that this life-threatening pandemic could give rise to inflation. For example, Bloomberg Economics warns that “full-year GDP growth could fall to zero in a worst-case pandemic scenario”.[11] There are many sectors and economies that appear to be most endangered because of this infectious virus, such as, both the demand and supply have been negatively affected by the infection, as a consequence of depressed activity. Foreign Direct Investment flows could drop between 5 to 15 percent. In addition, the most attacked sectors have come to peril such as tourism and travel-related companies, hotels, restaurants, sports events, consumer and electronics industries, financial markets, transportation, and overburden of health setups. Diane Swonk, Chief Economist at the Advisory Firm Grant Thornton, explained that “various nations have multinational companies that operate in the world because the economy is global. For instance, China has touchpoints into every other economy in the world, they are part of the global supply chain. So one should shut down production in the U.S. by shutting down production in China”.[12]
Also, Kristalina Georgieva in a press release gave a four-point plan i.e. she suggested that four things need to be done to fight against Covid-19 and avoid or minimize losses. Firstly, keep up with necessary containment courses of action and assistance for the health system. Secondly, protect affected people and firms with large timely targeted fiscal and financial sector expedients. Thirdly, lower down the stress from the financial system and avoid con tangent. Fourthly, must plan for recovery and revival and work towards minimizing the potential scaring effects of the crisis through policy action.[13]
Considering the deadly and intensifying conditions around the world, countries require cooperation, coordination and collaboration among themselves including the help and mature as well as practical behaviour of people to productively combat against the infectious disease. Otherwise, because of the globalized and connected world, wrong actions, plans and strategies taken by any nation state will produce a severe impact on other countries as well. This is not the time and situation of political point-scoring and fight with each other rather it is high time for all the countries to cooperate, coordinate, and collaborate and help each other to overcome this lethal pandemic first to save the global economic and financial structure.
Shruti Chaudhary is a law student at Dr. Ram Manohar Lohiya National Law University, Lucknow and is interested in matters of International Law and International Affairs.
[1] Mapping the Spread of the COVID-19 in the U.S. and Worldwide, Washington Post (March 4, 2020, https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.
[2] The Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19, The Economist (March 17, 2020), https://www.economist.com/international/2020/03/17/governments-are-still-struggling-toget-ahead-of-the-COVID-19.
[3] Minami Funakoshi, Mad March: how the stock market is being hit by COVID-19, We forum (May 5, 2020, 5;34 PM), https://www.weforum.org/agenda/2020/03/stock-market-volatility-coronavirus/.
[4] Nicholas Mulder, Adam Tooze, The Coronavirus Oil Shock is Just Getting Started, Foreign Policy (Apr. 23, 2020, 1:35 M), https://foreignpolicy.com/2020/04/23/the-coronavirus-oil-shock-is-just-getting-started/.
[5] Trade Set to Plunge as COVID-19 Pandemic Upends Global Economy, World Trade Organization (April 8, 2020), https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.
[6] Kristalina Georgieva, Confronting the Crisis: Priorities for the Global Economy, International Monetary Fund (Apr. 9, 2020), https://www.imf.org/en/News/Articles/2020/04/07/sp040920-SMs2020-Curtain-Raiser.
[7] Minami Funakoshi, Mad March: How the stock is being hit by Covid-19, We Forum (Mar. 23, 2020), https://www.weforum.org/agenda/2020/03/stock-market-volatility-coronavirus/.
[8] Trade Set to Plunge as COVID-19 Pandemic Upends Global Economy, World Trade Organization (April 8, 2020), https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.
[9] Richard Partington, Phillip Inman, Coronavirus escalation could cut global economic growth in half – OECD, The Guardian (Mar. 2, 2020, 5:36 GMT}, https://www.theguardian.com/business/2020/mar/02/coronavirus-escalation-could-cut-global-economic-growth-in-half-oecd.
[10] Irfan Mahar, Impact of Covid-19 on Global Economy, Eurasia Review (Apr. 22, 2020), https://www.eurasiareview.com/22042020-impact-of-covid-19-on-global-economy-structure-oped/.
[11] Tom Orlik, Jamie Rush, Maeva Cousin, Jinshan Hong, Coronavirus could cost the Global Economy $2.7 Trillion (March 6, 2020, 8:30 PM), https://www.bloomberg.com/graphics/2020-coronavirus-pandemic-global-economic-risk/.
[12] Why the economic impact of Covid-19 might outlast the outbreak, PBS (Feb 24, 2020, 6:53 PM EDT), https://www.pbs.org/newshour/show/why-the-economic-impact-of-covid-19-might-outlast-the-outbreak.
[13] Kristalina Georgieva, Confronting the Crisis: Priorities for the Global Economy, International Monetary Fund (Apr. 9, 2020), https://www.imf.org/en/News/Articles/2020/04/07/sp040920-SMs2020-Curtain-Raiser.
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