EFFECT OF CORONAVIRUS ON GLOBAL ECONOMY
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EFFECT OF CORONAVIRUS ON GLOBAL ECONOMY
1.1 Background of the Study
The continued spread of the new coronavirus has become one of the most serious dangers to the global economy and financial markets. According to the World Health Organisation, the virus
which was discovered in the Chinese city of Wuhan in December, has affected over 110,000 people in at least 110 nations and territories throughout the world. According to WHO figures, almost 4,000 individuals have died as a result of the infection.
The majority of confirmed cases are in China, with over 80,000 illnesses documented on the mainland thus far. To contain the COVID-19 epidemic, Chinese authorities have locked down cities, restricted millions of people’s movements, and disrupted commercial operations, all of which will slow the world’s second-largest economy and drag down the global economy.
To make matters worse, the sickness is rapidly spreading over the world, with countries including Italy, Iran, and South Korea reporting more than 7,000 cases apiece. Other European countries, such as France, Germany, and Spain, have also reported a recent rise of more than 1,000 cases.
From an economic standpoint, the essential problem is not the number of COVID-19 cases, but the extent of disruption to economies caused by containment efforts,” said Ben May, head of global macro research at Oxford Economics, in a paper released this week.”
Widespread lockdowns, such as those imposed by China, have been enacted in some virus hotspots,” he added, adding that if such actions are adopted disproportionately, they could cause panic and further undermine the world economy.
According to the research, China’s GDP growth had the highest magnitude decline. According to the OECD, the Asian economic superpower is predicted to grow by 4.9% this year, weaker than the previous prediction of 5.7%.
Meanwhile, the global economy is forecast to increase by 2.4% in 2020, down from the previously projected 2.9%, according to the research. The viral pandemic has had a significant impact on China’s manufacturing industry.
According to the Caixin/Markit Manufacturing Purchasing Managers’ Index, a private-sector survey, China’s industrial activity fell to a record low of 40.3 in February. A value below 50 suggests contraction.
The downturn in Chinese manufacturing has harmed countries with close economic ties to China, including Vietnam, Singapore, and South Korea, which are all Asia Pacific economies.
China’s factories are taking longer than planned to resume operations, according to various analysts. This, combined with the rapid expansion of COVID-19 outside China, indicates that global manufacturing activity could remain sluggish for longer, economists say.
The viral outbreak in China has also impacted the country’s services business, with reduced consumer spending hurting retail establishments, restaurants, and aircraft, among others.
China isn’t the only country whose services industry has suffered. According to IHS Markit, which publishes monthly PMI statistics, the services sector in the United States, the world’s largest consumer market, declined in February as well.
According to IHS Markit, one cause for the U.S. services contraction was a drop in “new business from abroad as customers held back from placing orders amid global economic uncertainty and the coronavirus outbreak.”
A drop in global economic activity has reduced demand for oil, driving prices to multi-year lows. That occurred even before a disagreement over production curbs between OPEC and its allies precipitated the most recent drop in oil prices.
According to analysts at Singaporean bank DBS, the virus outbreak’s reduced oil demand combined with an expected increase in supply is a “double whammy” for oil markets.
China, the epicentre of the coronavirus pandemic, is the world’s largest importer of crude oil. “The spread of the virus in Italy and other parts of Europe is particularly worrying and will likely dampen demand in OECD countries as well,” according to a report by DBS. Fears over the impact of COVID-19 on the global economy have dampened investor optimism and lowered stock prices in major markets.
According to Cedric Chehab, head of country risk and global strategy at Fitch Solutions, the coronavirus outbreak could affect market sentiment in three ways. “We identified three avenues via which the COVID-19 outbreak would pressure on markets: slowdown in China, slowing from domestic infections… “The third channel was financial market stress,” he told CNBC’s “Street Signs Asia” this week.
Concerns over the global spread of the new coronavirus have also pushed bond prices up, causing rates in key economies to fall. Treasury securities, which are backed by the United States government, are considered safe haven investments that investors seek out during times of market turbulence and uncertainty.
Fears about the coronavirus’s impact on the global economy have shook markets around the world, lowering stock prices and bond yields.
Kristalina Georgieva, Managing Director of the International Monetary Fund, has described the epidemic as the world’s “most pressing uncertainty.”
The virus’s economic disruptions and heightened uncertainty are reflected in lower valuations and higher volatility in financial markets (https://www.americanprogress.org).
Statement of the Problem
To analyse the potential economic impact of the coronavirus, it is necessary to consider not just the virus’s epidemiological profile, but also how consumers, businesses, and governments may respond to it.
COVID-19 will have the most direct impact on economic losses through supply chains, demand, and financial markets, influencing company investment, household consumption, and international trade.
And it will do so in both standard textbook supply-and-demand models and by introducing potentially high levels of uncertainty. Based on this, the researcher intends to explore the impact of the coronavirus on the global economy.
The objectives Of the study
The study’s aims are:
To assess the threat of coronavirus on the global economy.
To determine the influence of coronavirus on the global economy.
To determine the economic relevance of coronavirus to the world economy.
Research Hypotheses
HO: There is no threat of coronavirus to the world economy.
Hello: there is a threat of coronavirus on the world economy.
Hypothesis Two
HO: Coronavirus has little effect on the global economy.
Hello: There is an effect of coronavirus on the world economy.
Significance of the Study
The study will benefit both students and the wider public. The study will provide a thorough understanding of the impact of coronavirus on the global economy. The study will shed insight on the economic importance of coronavirus. The study will also serve as a resource for future researchers working on the same problem.
Scope and limitations of the study
The scope of the study includes the impact of coronavirus on the global economy. The researcher faces various constraints that limit the scope of the investigation;
a) AVAILABILITY OF RESEARCH MATERIAL: The researcher has insufficient research material, which limits the investigation.
b) TIME: The study’s time frame does not allow for broader coverage because the researcher must balance other academic activities and examinations with the study.
1.7 Definition of Terms
Coronavirus: Coronavirus disease (COVID-19) is an infectious disease caused by a recently discovered coronavirus. Most patients infected with the COVID-19 virus will develop mild to severe respiratory disease and recover without needing any additional treatment.
Older adults and those with pre-existing medical conditions such as cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to acquire serious illness.
Global economy: The world economy or global economy is the economy of all humans on the planet, defined as the international exchange of commodities and services expressed in monetary units of account.
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