Page 23 - Dream May 2020 English

COVID-19 SPECIAL
ECONOMY
COVID-19:
Impact on World Economy
inderjit singh
“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where The stands at times of challenge and controversy.” —Martin Luther King, Jr.
he World Health Organization (WHO) declared COVID-19 a pandemic on 11 March 2020, entailing enormous impact on our lives. Till 24 April 2020, more than 27,29,274 COVID-19 cases have been
reported worldwide with a death toll of over 1,91,614. China was the first country to experience the pandemic, with confirmed active cases at over 60,000 by mid-February. It however soon rapidly spread to several European countries including Italy, Spain, France, United Kingdom and also the United States of America. In order to check the spread of COVID-19 pandemic, the countries resorted to containment measures like lockdown to ensure social distancing. Lockdowns are not only imposed within the countries but inter-country movements have also been restricted.
The COVID-19 pandemic has pushed the world into a recession. This has also been endorsed by the International Monetary Fund. The recession is likely to be as bad as or worse than that of 2009. This will be worse than any of the global financial crises in the past. Due to the exponential rise in new infections across the globe, the economic damage is rising across the continents. Around the world, economists are quickly trying to adjust economic models to judge where our world is heading to and evolve ways to address the crisis.
The broad areas where impact of COVID-19 can be noticed are direct impact on production, supply chain and market disruption, and financial impact on firms and financial markets. The major impact comes from fall in retail output, wholesale trade and in professional and real estate services; although there are inter-county differences in these sectors, depending upon the area of expertise of the countries.
Severity of the impact can be judged from the fact that as per United Nations, global economy could shrink by almost one per cent in 2020 due to COVID-19 pandemic.
As per Organisation for Economic Co-operation and Development (OECD), the impact of business closures could cause reductions of 15 per cent or more throughout the advanced and major emerging-market economies. In the median economy, output would decline by 25 per cent.
Countries which depend on tourism for a major part of their economy are likely to be affected more severely by containment measures such as shutdowns and restrictionson travel. On the other hand, countries with somewhat sizeable agricultural and mining sectors, including oil production, may experience
smaller initial effects from the containment measures. Output of such countries will also be later impacted by reduced global commodity demand.
The potential initial impact on activity of partial or complete shutdowns in various advanced and emerging market economies can be appreciated with the help of Figure 1.
Per cent of GDP at constant prices
(Source: BSE and NSE)
The Purchasing Managers' Index (PMI) is an economic indicator. It surveys purchasing managers at businesses ina given sector. Manufacturing PMI and the services PMI are the most known PMI surveys.As per latest indices from PMI Surveys, sharp slowdowns have been noticed in manufacturing output in many countries, reflecting drops in external and domestic demands. China,in a positive note, is seeing a modest improvement in its PMI after sharp declines early in the year, despite weak external demand. This can be visualized from Figure 2, which inter-alia compare the data for the months of February and March 2020.
Manufacturing output PMI, >50 = expansion seasonally adjusted
(Source: OECD: Evaluating the initial impact ofCOVID-19 containment measures on economic activity)
International Labour Organization (ILO) forecasts that the impact could cause equivalent of loss of 195 million jobs. The
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FIGURE 2 FIGURE 1