The outbreak has led major institutions and banks to cut their forecasts for the global economy. The ongoing spread of the new coronavirus has become one of the biggest threats to the global economy and financial markets. The virus, first detected in the Chinese city of Wuhan last December, has infected more than 110,000 people in at least 110 countries and territories globally, according to the World Health Organization. Of those infected, more than 4,000 people have died, according to WHO data.
Coronavirus will change how we shop, travel and work for years. To contain the COVID-19 outbreak, Chinese authorities locked down cities, restricted movements of millions and suspended business operations — moves that will slow down the world’s second-largest economy and drag down the global economy along the way.
To make things worse, the disease is spreading rapidly around the world, with countries like Italy, Iran, and South Korea and other European countries.
This time it’s a public health emergency that’s shaking up the world economy. In just a matter of weeks, people in affected areas have become accustomed to wearing masks, stocking up on essentials, cancelling social and business gatherings, scrapping travel plans and working from home. Even countries with relatively few cases are taking many of those precautions.
Traces of such habits will endure long after the virus lockdowns ease, acting as a brake on demand. On the supply side, international manufacturers are being forced to rethink where to buy and produce their goods -- accelerating a shift after the U.S.-China trade war exposed the risks of relying on one source for components.The manufacturing sector in China has been hit hard by the virus outbreak. Such a slowdown in Chinese manufacturing has hurt countries with close economic links to China, many of which are Asia Pacific economies such as Vietnam, Singapore and South Korea.
Universities stung by travel bans will diversify their foreign student base and schools will need to be better prepared to keep educating online when breakouts force their closure.The tourism sector is seeing the most drastic hit, with flights, cruises, hotels and the web of businesses who feed off the sector struggling. While tourists will no doubt be eager to explore the world and relax on a beach again, it may take some time before the industry that hires about one in 10 people recovers.
“From an economic perspective, the key issue is not just the number of cases of COVID-19, but the level of disruption to economies from containment measures,”
Ben May, head of global macro research at Oxford Economics, said in a report last week.
Factories in China are taking longer than expected to resume operations, several analysts said. That, along with a rapid spread of COVID-19 outside China, means that global manufacturing activity could remain subdued for longer, economists said. A reduction in global economic activity has lowered the demand for oil, taking oil prices to multi-year lows. That happened even before a disagreement on production cuts between OPEC and its allies caused the latest plunge in oil prices.The virus has also turned the economic policy outlook on a dime and created new priorities.
Central banks are in emergency mode again, while governments are digging ever deeper to find money to prop up struggling sectors.Kazuo Momma said “This outbreak is unprecedented in terms of its nature of uncertainty and associated social and economic impact; Tighter borders controls, wider insurance coverage and lasting changes to working and commuting patterns will be just some of the micro-economic changes that will endure long after the virus.” Because no one knows how the virus will play out or what the final human and economic toll will be economists caution against concrete predictions.
China, the epicenter of the coronavirus outbreak, is the world’s largest crude oil importer. “The oil supply shock in the 70s led to the first efforts of energy conservation and efficiency,” Fabrizio Pagani said a former adviser to the Prime Minister of Italy. “The demand shock determined by the great financial crisis was the rationale for a new, quite radical, regulatory framework across the banking and financial sectors.” Fear surrounding the impact of COVID-19 on the global economy has hurt investor sentiment and brought down stock prices in major markets.A triple convergence of Brexit, the U.S. China trade war and now Covid-19 could reshape the world’s manufacturing supply chains, according to Michael Murphree, of the University of South Carolina’s Darla Moore School of Business.
Analysts from Singaporean bank DBS said reduced oil demand from the virus outbreak and an expected increase in supply are a “double whammy” for oil markets. “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,” the DBS analysts wrote in a report. “Only in a crisis are governments able to rally people to accept necessary but painful reforms; Every crisis is also an opportunity.” said Boughton.
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