Coronavirus: The Global Economic Impact
It has been four months since the first confirmed case of Coronavirus. The novel Coronavirus has distinguishing characteristics such as high infectivity, good concealment and detection difficulty. With these advantages and the help of a highly developed global transportation infrastructure, the new virus has quickly spread out to more than 200 countries and hundreds of thousands of people have been infected.
People brought the virus to their family, places of work and restaurants even without knowing that they were already infected.
Beyond human loss, the virus has also caused tremendous pain to the global economy. The impact has spread to several industries including hospitality, travel, leisure, dining and retail.
With the quick global spread of the coronavirus, several countries and areas have decided to limit overseas flight including foreign and domestic airlines.
Through February 1st to the 8th, United Airlines canceled all their flights from China to New York, Washington DC and Chicago. As the epidemic has intensified and the global situation has deteriorated, more and more flights are being canceled.
Global airlines stand to lose $113 billion in sales if the coronavirus continues to spread, according to the International Air Transport Association.
The financial losses global airlines stand to lose will be as large as the hit they received during the global financial crisis of 2008.
Dozens of major airlines are canceling flights to and from the countries that are suffering the major outbreaks due to travel restrictions and a lack of demand from customers. So many countries are being infected that there are practically no major countries without some Coronavirus worry.
If the virus is contained soon, and economies around the world can recover quickly, total industry losses could be limited to $63 billion according to Alexandre de Juniac, the CEO of the International Air Transport Association.
Investors have punished airlines stocks in recent weeks, with most major airlines seeing stock losses of 50-75%.
The global airline industry will probably need e government assistance in some parts of the world, especially where the airlines are weaker financially, said by De Juniac.
Airline stocks were not the only ones impacted by coronavirus; the whole US stock market dropped sharply.
The stock market crash began on Monday, March 9. The Dow Jones Index fell 2013.76 points to 23,851.02. The following week, the Dow kept falling to hit a peak to trough drop of 35.1%.
Investors had been jittery ever since the United States started a trade war with China and the COVID-19 coronavirus pandemic has brought this negative phenomenon to its peak. All eleven S&P stock sectors were negative last Friday, and most are down at least 10 percent for the year.
Industries like airlines, trucking transportation, automobiles and restaurants virtually shut down due to the coronavirus outbreak, so oil demand has rapidly decreased. Analysts from the Singaporean bank DBS said reduced oil demand from the virus outbreak and an expected increase in supply are a “double whammy” for oil markets.
Manufacturing activity and service industry has taken a strong hit by the virus outbreak. After China launched a quarantine policy, the country declared a nationwide state of emergency. Ground transportation, factory and all public services were shut down. Manufacturing activity in China dramatically decreased.
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. It has also impacted transnational corporations like Apple, which is suffering unprecedented pressure.
Apple shut down all retail stores, corporate offices, and contact centers in China for two or more weeks due to the Coronavirus epidemic. Many of the stores started reopening in late February but were all operating reduced hours. With the government's travel bans and quarantine policy, and the public’s fear of contracting coronavirus, there was much foot traffic in Apple stores in China.
With manufacturing being shut down, Apple device production also faces pressure. Due to a strict quarantine policy being launched at New York, most restaurants and retail have decided to close due to the lack of customers. With the situation becoming worse, the US consumer market is going to suffer an even larger contraction.
While summer is coming, we do not know if coronavirus will stop around July like SARS or if it will keep going. The only thing we know is that we have lost so much in this global disaster. What happened has already happened. After the storm finally calms, there is nothing wrong about keeping our head straight and looking forward, but we must learn from it, learning that every person and organization has the responsibility of helping each other. When disaster comes, we are all in this together. Only united, will we be stronger.