Global Implications of the Coronavirus Pandemic

Kashvi Singh

The ongoing crisis due to the coronavirus outbreak has become the single biggest threat to the global economy. With more than 15,400 people already dead across the globe, it certainly poses a question about how concerned we should be regarding a possible global financial crash, if the virus keeps spreading at the current rate.

As of now, the worst affected countries including China, Italy and Spain have imposed heavy lockdowns in the regions, while other countries have only advised their citizens to self-isolate. The British government has released a new wage support scheme to ensure that financial loss suffered by businesses and by those who are self-employed due to self-isolation is minimised. Many other countries have also responded in a similar way by introducing financial help of some sort to those affected due to self-isolation, which is a rather reassuring sign as it encourages people to stay at home to control the spread of the virus. Central banks across the world have also lowered their interest rates in order to encourage borrowing, and thus, spending. However, one can question as to what extent this could help in reviving the economy when people cannot step out and spend in the first place.

There are however, questions about the degree of response by other countries that are at the moment, relatively less affected. The tragedy in Italy only stands as a warning to governments of other nations who are not taking the virus very seriously, which again reflects the conflict between the health of the economy and the health of the people themselves. While some nations are prioritising their economy by not imposing lockdowns, some argue that this could lead to even severe economic repercussions if a sudden spike in the number of cases occurs, as was the case in Italy.

There are also major concerns over the virus spreading into developing nations, as the World Health Organisation (WHO) has warned - “A potential paralysation of already vulnerable healthcare systems would not only have a drastic impact on population health, but could also push people further into poverty and deprivation”.

The fear that has seeped in amongst investors regarding economic decline due to the virus, is particularly dangerous, as it means that most of the burden of economic renewal is forced onto the machinery of government. However, these are only short-term impacts of the virus and there is sufficient evidence from the past that suggests that ‘growth picks up pretty quickly post-pandemic’.

The decline of the aviation industries, however, can make the economy more prone to slow growth due to the high risks of unemployment caused by downsizing. On the 5^th of March, the International Air Transport Association (IATA) estimated that the airline industry could lose between US$63 to 113 billion of revenues due to the reduced number of passengers. Financial markets are now also anticipating a large fall in airline profits globally, far beyond the SARS impact. This is concerning as the aviation industry makes up around 3.5% of the world GDP, which reveals why it is so crucial to revive this sector.