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Coronavirus: Assessing the Economic Impact of the Pandemic

April 02, 2020 | Healthcare

The novel coronavirus, also known as COVID-19, has put a stranglehold on the world and threatens to inflict potentially irreparable damage to the global economy. Transforming into a pandemic at a breathtaking speed, the virus has forced people to reduce contact with each other, or what is now known as “social distancing”, and stay and work from their homes. According to financial experts, this will create interesting opportunities for a select few stakeholders. It would, thus, be instructive to take a look at the “beneficiaries”.

Which Industries Stand to Benefit from this Outbreak?

Economic pundits have managed to identify a few bright spots in this dreary picture. These bright spots comprise mainly of companies that are veterans in developing products and services that can be easily accessed and availed from home such as online retailing, online video streaming, e-conferencing, and cloud services. Let us take a look at a few of them:

  • E-commerce: We all know that how SARS outbreak contributed to the significant growth of JD.com and Alibaba. Analysts at JPMorgan state that the e-commerce is set to gain significantly as the popular reluctance to go shopping in physical stores is fast gathering steam around the world. As a result, online retailing is likely to deepen its presence among consumers as they gradually shift toward online purchasing of goods. One of the largest beneficiaries of this shift, JPMorgan analysts point out, will be Amazon, which, they believe, is best positioned to exploit this opportunity. It is, therefore, not surprising that the company creation of 100,000 positions across its fulfillment and delivery centers.

  • Online Streaming Services: Furthermore, online streaming service providers such as Netflix also reported a substantial spike in viewership as many American cities went into lockdown last weekend. Self-quarantine and social distancing has increased the consumption of media for the homebound population. JPMorgan predicts that these companies are also poised to grow in a stable manner during this period and make incremental gains after the crisis is over.

  • Work from Home: An article in the New York Times pointed out how the current ‘work from home’ trend has surged the usage of Alphabet’s Google search services and YouTube. Additionally, Google’s cloud services have also experienced a spike as the lockdown has forced professionals to appreciate the efficacy of such services. Thank God to cloud computing services, that has made our work much easier and simpler.

  • Burgeoning Video Views and Impressions: The same article also highlighted how social media platforms, primarily Facebook, witnessed a skyrocketing rise in video views and news regarding covid19. The self-isolated consumers want to be keep themselves abreast of the latest happenings around the world from the comfort of their homes. In addition to this, virtual parties have become one of the hottest trends on the social media these days.

Coronavirus Pandemic Economic Impact

Another Glimmer of Hope: Government Efforts to Contain the Spread of Covid19

The virus outbreak is also turning out to be a blessing in disguise for the fields of medicine and epidemiology along with the pharmaceutical industry as the outbreak has renewed faith in academic medical research and governments around the world are ready to pay top dollar for it. Just this week the US Congress approved $3 billion in funding for research and development of tests, treatments, and vaccines for the coronavirus. Moreover, the federal Biomedical Advanced Research and Development Authority, in partnership with Regeneron Pharmaceuticals, announced that it would bear 80% of the costs in developing and producing coronavirus treatment. Similar response has been witnessed in the European Union (EU) in March 2020 when the European Commission announced an additional influx of €37.5 million towards coronavirus research. More recently, Welsh government has announced a support package of £1.1 billion for businesses during the coronavirus pandemic. This outpouring support will not only encourage people to fight against this newly discovered infectious disease but will also bring a ray of hope for the covid19 treatment.

Lockdowns: Valuing People over Economy

Countrywide lockdowns, medical researchers say, will be critical in containing the spread of the virus and flattening the curve of the peak period of the virus. Wuhan, the Chinese city where the index case of the virus emerged, has been under lockdown for almost two months now and is slowly recovering. Following China’s example, many European countries, primarily Spain and Italy where the number of positive cases and deaths skyrocketed in a matter of weeks, imposed lockdowns in a desperate effort to curb the spread of the virus. The direct impact of these measures is being borne by the global economy, killing demand and choking supply, and the long-term projections are anything but encouraging.

The Great Depression of 1929: History Repeats Itself?

The infamous 10-year-long Great Depression of 1929 is etched in peoples’ minds and is of particular interest to economic historians and political scientists. One of the biggest, and often overlooked, causes was the Great Influenza Epidemic, better known by its incorrect moniker “Spanish Flu” that ravaged the world economy between 1918 and 1920. Research conducted by economic historians at Harvard University in 2008 revealed that the global real per capita Gross Domestic Product (GDP) declined by more than 10% during the epidemic. Combined with the enormous damage caused by the First World War, the epidemic laid the foundations for the Great Depression that shook the world less than a decade later. Although the spread of the Covid-19 is unlikely to reach the levels that the 1918 influenza did, it has already cast a dark shadow on the global economic prospects.

Which Industries will Negatively Impact from this Pandemic? 

According to a report by the Organization for Economic Co-operation and Development (OECD), if the COVID-19 outbreak lasts longer than expected and intensifies, global economic growth will plausibly fall to just 1.5%, as opposed to 2.9% that was projected prior to the outbreak. Overall, the OECD predicts, the global economy will progress at a solemn 2.4% throughout 2020 as a result of widespread disruptions in global supply chains and commodities markets. Moreover, a few industries are slated to bear the brunt of the pandemic. These include:

  • Aviation: The International Air Transport Association (IATA) foresees a revenue loss totaling $113 billion in the aviation industry under the worst case scenario that the virus is not contained and continues to spread at the current rate.

  • Travel and Tourism: According to the World Travel and Tourism Council, the coronavirus pandemic could lead to a loss of 50 million jobs worldwide in the travel and tourism industry. With the tourism industry accounting for around 10% of the global GDP, job and revenue losses amounting to millions could spell doom for this industry.

  • Hospitality: This industry is heavily dependent on travel and tourism and therefore, any disturbance in the latter has a direct bearing on the former. The British Broadcasting Corporation (BBC) reported that restaurant bookings in major economies have virtually collapsed. For instance, in Canada, hotel bookings nosedived by a shocking 94%.

  • Energy: The energy sector is set to experience a rough period as the coronavirus has gravely affected China’s economy, stalling demand for crude oil. The International Energy Agency (IEA) estimates that the global oil demand is expected to fall by 435,000 barrels per day in just the first quarter of 2020.

  • Shipping: The global shipping industry is losing roughly $350 million every week because of the virus outbreak, according to the International Chamber of Shipping.

  • Automotive: Being the epicenter of the outbreak and holding considerable weight in global automotive supply chains, economic downturn in China has severely impacted the automotive sector. For instance, in February, Bloomberg reported that Fiat Chrysler halted its car production operations in Serbia as imports from China came to a standstill.     

Preparing for the Worst, Hoping for the Best?

In spite of its low fatality and high recovery rate, doomsday predictions surrounding the coronavirus abound the world. Funnily enough, they might have some credence. For instance, why would an economy as large as India voluntarily announce a 3-week-long lockdown, despite knowing full well the economic ramifications of such a move? What does it tell us? It is a clear indication that the threat of the virus is graver than it seems and governments are priming their citizens for the dark days that lie ahead. Is this the end? No, humans have survived worse disasters. Will this trigger a socio-economic reorganization of the world? It most certainly will. This crisis is the litmus test of human resilience and the human spirit will no doubt triumph in the end. So, let’s not lose hope, in fact, let’s hope for the best.

About the Author

Name: Shantanu Ayachit

Shantanu Ayachit is part of a talented team of content writers working in Fortune Business Insights™, one of the most promising market research firms in the industry. He has experience in developing quality content and is currently involved in writing articles, press releases, and blogs for the company. He is highly motivated and enjoys putting ideas and thoughts into words to enable the reader to experience a seamless perusal.

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