Economic Consequences of COVID-19

It has just been four months into 2020 and our minds are already gripped with fear, uncertainty, and panic. Coronavirus Pandemic abbreviated as COVID-19 has claimed lives, torn down economies, compelled governments across the world to take extraordinary measures, and jeopardized the revenue inflow for almost every industry.

A financial catastrophe, ten times that of the 2008 Lehman crisis coupled with a health emergency has hit normalcy in every corner of the globe. With lockdowns halting manufacturing operations and corporates embracing work from home, economic activities have almost come to a standstill. The International Monetary Fund(IMF) MD Kristalina Georgieva claims that the outlook for 2020 is already negative. IMF has also claimed that this is the biggest economic slump since the Great Depression.

For the first time ever since 1929, the stock markets plummeted by 32% in just 18 days! Investors have removed $83 billion since the beginning of the crisis. Wall Street, European Markets, and the Asian markets have been jittery and highly volatile since the outbreak. Sensex saw its biggest one day fall of over 4000 points. Wall Street also erased a large chunk of investor money and hit the circuit level multiple times in March and April. Online giants such as Amazon, Flipkart have suspended their operations in several places. Tech Conferences such as the Mobile World Congress, Apple WWDC, Facebook global marketing summit and many more stand canceled, and their direct economic loss from cancellation is pegged at $1.1 billion according to PredictHQ. Aviation, Hospitality, and Tourism are perhaps the worst affected avenues. The World Travel & Tourism Council(WTTC) has estimated that the sector will witness a 12%-14% job contraction and Asia will bear the maximum brunt of it. Airlines such as Go Air and Indigo have already announced pay-cuts. The airline industry estimates that most of the airlines will become cash-strapped if governments do not come to rescue. The education sector has also not been spared from the clutches of this deadly virus. 849 million students have been impacted by Universities postponing examinations and resorting to virtual modes of teaching as per the Organisation for Economic Council and Development(OECD).

Many pundits feel that the Micro Small and Medium Enterprises will not be able to withstand the losses incurred during this period. To the dismay of all the sports and entertainment enthusiasts, several tournaments such as Premier League, La Liga, Bundesliga, Indian Premier League, F1 races, London and Boston's marathons have either been annulled or pushed to a further date. The Olympics, which were slated to take place on 24th July 2020 have been rescheduled for 2021. The release of several movies has been deferred and concerts have been canceled. Disney Parks across the world have shut. The Poultry industry lost Rs 1.5 trillion as it, unfortunately, fell a victim to rumor-mongering, where a video claimed that chickens are the carriers of COVID-19. Uncertainty looms over the commercial and retail real estate in India. With the increasing restriction on movements, the footfall in malls, stores, restaurants, and office spaces has seen a huge slump. In fact, Realty stocks have witnessed the sharpest fall in a month. Perhaps, the most severe indication of a slowdown was when Oil plunged below zero for the first time.

Automobile industries across the world have crunched into reverse gear with manufacturing activities hitting a pause button and demand being ravaged by the virus. The Indian Automobile industry is currently facing a double whammy with a halt in production and unsold stock of BS6 fuel. Manufacturing and construction units that depend primarily on migrant workers will deal with a major collapse in production due to a lack of employees at the sites. Daily wage earners of the logistics and transport industry can barely make ends meet due to severe dip in their daily wages. This is a vicious cycle of sorts where consumers stay home, businesses lose revenue, they fire employees which spike unemployment levels. Eventually, a significant amount of pressure will be mounted on the banking and financial sectors due to soaring bankruptcies and contraction in investments.

However, some industries have benefited largely. With lockdowns in multiple countries, online streaming giants such as Netflix, Disney Hotstar and Amazon Prime have seen a surge in subscriptions. Internet services have also seen a sharp spike in data usage as people are spending more time indulging in work from home and other leisure activities. Telecommunication industries and companies such as Zoom, Google Duo have witnessed a steep rise in their business as the world grapples to stay in touch with their loved ones as well as to conduct economic activities in the times of social distancing. Gaming apps such as Psyche, Ludo, Uno are clearly the big winners. Media Channels' viewership has jumped by a whopping fifty percent. Insurance companies are witnessing a surge in insurance policies amidst the COVID-19 scare. Pharmaceuticals have perhaps gained the lion’s share in terms of profit. Pharma stocks have been skyrocketing ever since several companies have entered the fray to find a vaccine.

This upheaval has perhaps ignited a million questions in our minds. The foremost being, are countries such as the USA, Italy, Germany even capable of calling themselves advanced? With confirmed cases and the death toll rising every minute, it makes me wonder about the startling difference between India’s fight against the virus and that of the developed nations. It makes me also question the possibility of China introducing the virus as a bioweapon to destroy economies. The bottom-line is we require a set of fiscal, monetary policies, tax-cuts, cash handouts to allay the liquidity crunch among companies so that they cushion the blow as well as revive demand. Cementing national unity and global solidarity in the face of adversities is of paramount importance to win this battle. In a nutshell, the political, social, and financial ramifications could be long-lasting unless there are unanimous, swift, and astute decisions taken across the globe by world leaders.