EFFECT OF CORONAVIRUS ON GLOBAL ECONOMY
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EFFECT OF CORONAVIRUS ON GLOBAL ECONOMY
A SHORT SUMMARY OF CORONAVIRUS’ IMPACT ON THE WORLD ECONOMY
This research looked at how the coronavirus affected the world economy. The study will shed light on the origins, consequences for the world economy, and economic significance.
The following goals were evaluated: to determine if the coronavirus is economically significant to the world economy, to determine the threat the coronavirus poses to the world economy, and to determine the impact the coronavirus has on the world economy. Developed and put out hypotheses were made in accordance with the aims.
CHAPITER ONE
1.1 BACKGROUND OF THE STUDY
One of the biggest concerns to the world economy and financial markets is the new coronavirus’s continued expansion. According to the World Health Organisation,
the virus has infected more than 110,000 people in at least 110 nations and territories worldwide since it was first discovered in the Chinese city of Wuhan in December. According to data from the WHO, more than 4,000 of those infected had passed away.
Most of the confirmed cases are in China, where more than 80,000 infections have so far been documented on the mainland. Chinese authorities shut down cities, restricted the movement of millions of people, and disrupted corporate operations in order to contain the COVID-19 epidemic. These actions will slow down the world’s second-largest economy and ultimately bring down the global economy.
To make matters worse, the illness is fast spreading around the globe; countries including Italy, Iran, and South Korea have each reported more than 7,000 cases.
A recent increase of more than 1,000 cases has also been observed in other European nations like France, Germany, and Spain (https://www.cnbc.com).
Ben May, head of global macro research at Oxford Economics, stated in a paper this week that the main concern from an economic standpoint is not simply the number of COVID-19 instances, but also the extent of damage to economies from containment measures.
“Widespread lockdowns like those imposed by China have been enacted in some virus hotspots,” he added, adding that if used excessively, such measures might cause panic and further undermine the world economy.
According to the report, China’s GDP growth had the biggest decline in terms of magnitude. According to the OECD, the massive Asian economy would expand by 4.9% this year, which is less than the earlier prediction of 5.7%.
According to the analysis, the global economy would expand by 2.4% in 2020 as opposed to the 2.9% predicted earlier. The viral pandemic has had a significant negative impact on China’s manufacturing industry.
China’s factory activity decreased in February, falling to a record-low value of 40.3, according to the Caixin/Markit Manufacturing Purchasing Managers’ Index, which was compiled from a survey of private enterprises.
Contraction is indicated by a value below 50. It has harmed nations with strong economic ties to China, many of which are Asia Pacific economies, including Vietnam, Singapore, and South Korea.
According to various observers, it is taking Chinese factories longer than anticipated to get back to work. This, together with COVID-19 spreading quickly outside of China, means that manufacturing activity around the world may stay weak for longer, according to economists.
As a result of decreased consumer spending, the services sector in China has also been negatively impacted by the viral spread. Not just in China has the services industry suffered from a decline.
IHS Markit, the company that publishes the monthly PMI statistics, reports that the services sector in the United States, the largest consumer market in the world, also shrank in February.
Reduced “new business from abroad as customers held back from placing orders amid global economic uncertainty and the coronavirus outbreak,” according to IHS Markit, was one factor in the decrease of U.S. services.
Oil prices have fallen to multi-year lows as a result of a decline in oil demand due to a decline in global economic activity. That occurred even before the most recent drop in oil prices was brought on by a disagreement over production cuts between OPEC and its partners.
A “double whammy” for the oil markets, according to analysts at Singaporean bank DBS, is the viral outbreak’s impact on reduced oil consumption and an anticipated rise in supply. The biggest importer of crude oil in the world is China, the location of the coronavirus pandemic.
The DBS analysts stated in a study that “the virus’ spread in Italy and other regions of Europe is particularly concerning and will probably reduce demand in OECD countries as well.” Fear over COVID-19’s effects on the world economy has damaged investor confidence and driven down stock prices in important markets.
According to Cedric Chehab, head of country risk and global strategy at Fitch Solutions, the coronavirus outbreak could affect market sentiment in three different ways.
We’ve determined that the COVID-19 epidemic would affect markets through three different avenues, including the slowdown in China and the slowdown brought on by local breakouts. He said this week on CNBC’s “Street Signs Asia” that the third channel was the stress in the financial markets.
Investor demand for bonds has increased as a result of worries about the new coronavirus spreading globally, which has also caused rates in important economies to gradually decline. Investors frequently seek refuge in U.S. Treasury bonds, which are backed by the American government and are regarded as safe haven securities.
Concerns about the effects of the coronavirus on the international economy have shook markets all around the world, sending stock prices and bond yields down.
The epidemic is the “most pressing uncertainty” in the globe, according to Kristalina Georgieva, managing director of the International Monetary Fund. Lower values and more volatility in the financial markets are being reflected by the virus’s effects on the economy and the increasing level of uncertainty (https://www.americanprogress.org).
STATEMENT OF THE PROBLEM
It’s critical to consider not just the virus’ epidemiological profile but also how people, businesses, and governments might react to it in order to gauge the coronavirus’ potential economic effects.
Supply chains, demand, and financial markets will all have an impact on COVID-19’s ability to directly effect company investment, consumer spending, and global trade.
And it will do it both through the application of potentially high degrees of uncertainty and conventional, textbook supply-and-demand methods. The researcher wants to look into how the coronavirus affects the global economy in light of this.
OBJECTIVES OF THE STUDY
The study’s aims are;
Determine the impact of the coronavirus on the global economy
To determine how the coronavirus affects the world’s economy
To determine whether the coronavirus has a financial impact on the world economy
RESEARCH HYPOTHESES
HO: The coronavirus does not pose a threat to the world economy.
HI: The coronavirus poses a threat to the world economy.
SECOND HYPOTHESES
HO: Coronavirus has little impact on the world economy.
Hi: The coronavirus has an impact on the world economy.
SIGNIFICANCE OF THE STUDY
Both students and the broader public will benefit from the study. The study will provide a thorough understanding of how the coronavirus affects the world economy.
The investigation will shed insight on the coronavirus’s economic significance. The work will also be used as a resource by other researchers who may pursue a similar subject.
SCOPE AND LIMITATIONS
The study’s focus includes the impact of coronavirus on the world economy. The study’s scope was constrained due to a constraint the researcher encountered;
a) AVAILABILITY OF RESEARCH MATERIAL: The study is constrained by the researcher’s access to insufficient research material.
b) TIME: Because the researcher must juggle the study with other academic obligations and exams, the time allotted for the investigation does not improve wider coverage.
1.7 DEFINITION OF TERMS
Coronavirus: Coronavirus disease (COVID-19) is an infectious illness brought on by a coronavirus that has just been identified. Most COVID-19 virus-infected individuals will experience a mild to severe respiratory infection and recover without the need for special care.
Serious sickness is more likely to strike older persons and those with underlying medical conditions including cancer, diabetes, cardiovascular disease, or chronic respiratory diseases.
World economy or global economy: The world economy, often known as the trade of commodities and services across international borders expressed in monetary units of account, is the economy of all people living in the world.
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