Implicati Ons of Covid-19 in Economics
Implicati Ons of Covid-19 in Economics
Implicati Ons of Covid-19 in Economics
Introducti on
The world has witnessed many challenging situati ons throughout history. These
challenges were wars someti mes or revoluti ons that reshaped the economics completely.
Yet, the contagious diseases having global eff ects had forgott en long ti me ago even if
there appeared some recent encounters in the past 20 years. The closest epidemic
records were SARS-COV of 2002–2003, avian infl uenza (H5N1) of 2004–2006 and MERS-
COV of 2012. However, the third decade of the twenty-fi rst century brought epidemics
into the agenda once again. The world had to face with a virus called COVID-19, a new
mutati on of coronavirus family with the announcement of the fi rst case in Wuhan district
of China by the 1st of December 2019. In 2020, the world faced COVID-19, a globally
eff ecti ve virus leading to mass losses and socio-economic panic. Due to apparent psycho-
social conditi ons, analyzing the potenti al economic eff ects of the COVID-19 pandemic was
inevitable. In the year since the COVID-19 outbreak was fi rst diagnosed, it has spread to
over 200 countries and all U.S. states. The pandemic has negati vely aff ected global
economic growth beyond anything experienced in nearly a century. Esti mates so far
indicate the virus reduced global economic growth to an annualized rate of -4.5% to
-6.0% in 2020, with a parti al recovery of 2.5% to 5.2% projected for 2021. Global trade is
esti mated to have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021.
According to a consensus of forecasts, the economic downturn in 2020 was not as
negati ve as initi ally esti mated, due, at least in part, to the fi scal and monetary policies
governments adopted in 2020. Major advanced economies, which comprise 60% of global
economic acti vity, are projected to operate below their potenti al output level through at
least 2024. Compared with the synchronized nature of the global economic slowdown in
the fi rst half of 2020, the global economy has shown signs of a two-track recovery that
began in the third quarter of 2020 with developed economies experiencing a nascent
recovery and economic growth in developing economies lagging behind. A resurgence in
infecti ous cases in Europe, the United States, Japan, Brazil, India, and various developing
economies renewed calls for lockdowns and curfews and threatened to weaken or delay a
potenti al sustained economic recovery into mid to late 2021.
Main Idea
Recent research has focused on evaluati ng initi al eff ects of the pandemic regarding
consumpti on, services, fi nance and investments and industries partly. Due to lockdown
enforcements and voluntary social distancing, services sector, travel, tourism, catering
and leisure, got aff ected criti cally. China, where the novel virus showed up fi rst, the
foregone tourism revenue was forecasted by luxurious travel agencies as 75% and this
would mean almost $ 95 billion in 2020 referring to 2019 data . Due to IATA’s (The
Internati onal Air Transportati on Associati on) recent projecti ons, the aviati on industry’s
expected passenger revenue loss for 2020 is $ 113 billion and this counts more than 20%
of the overall projected revenue.
The change in offl ine consumpti on expenditures was evaluated for 214 citi es of China
[ 12 ]. There reported a 32% reducti on in expenditures for retailing and services. The
esti mated rate for Wuhan district was even more than 70%. Therefore, the researchers
projected at least 1.2% fall in overall GDP in 2020 due to the fall in consumpti on. The
shock on retail and services sector for India was esti mated by Kasare . The fi ndings
indicated that loss of hotels, restaurants and aviati on would be 20% in 2020, if the
lockdown conti nues for 3 months. These fi ndings referred to declinati on in nati onal
income and rising budget defi cit in 2020.
Conclusion
As the spread of the virus is likely to continue disrupting economic activity and
negatively impact manufacturing and service industries, especially in developed
countries, we expect that financial markets will continue to be volatile. There is
still a question as to whether this unfolding crisis will have a lasting structural
impact on the global economy or largely short-term financial and economic
consequences. In either case, it is evident that communicable diseases such as
COVID-19 have the potential to inflict severe economic and financial costs on
regional and global economies. Because of high transportation connectivity,
globalization, and economic interconnectedness, it has been extremely difficult and
costly to contain the virus and mitigate the importation risks once the disease
started to spread in multiple locations. This warrants international collective action
and global investment in vaccine development and distribution, as well as
preventive measures including capacity building in real-time surveillance and the
development of contact tracing capabilities at the national and international levels.
COVID-19 is not only a global pandemic and public health crisis; it has also
severely affected the global economy and financial markets. Significant reductions
in income, a rise in unemployment, and disruptions in the transportation, service,
and manufacturing industries are among the consequences of the disease mitigation
measures that have been implemented in many countries. It has become clear that
most governments in the world underestimated the risks of rapid COVID-19 spread
and were mostly reactive in their crisis response. As disease outbreaks are not
likely to disappear in the near future, proactive international actions are required
to not only save lives but also protect economic prosperity.