Right now, you’re probably at your house reading this (or at least I hope you are), and thinking that we are all doomed for the several months ahead of us. Maybe, and it’s exactly why it is important to understand more of this exceptional circunstance.
Since the beginning of coronavirus pandemic, we have seen a double impact on China, not only over the economic demand, but also with the production. Let’s think a bit: the fabrics and the offices are forced to close, therefore, no one can produce anything. And on the other hand, you, that is at your home right now, is not buying anything either, so you can’t increase the demand. See where this is going?
At the beginning of the month, the United Nations Conference on Trade and Development (UNCTAD), predicted that the global impact of this pandemic could cost U$ 2 trillion this year. Ok, but, you may be asking yourself, what is really going on for that to happen?
Overview
To begin with, we should know that the global impact varieties according to the measures taken in each country. For example, in Europe we can see the governments with extreme actions, applying fines when necessary, for the citizens to stay home.
If we think about the production, we know that China is one of the world biggest supplier, therefore, some big companies like Nissan or Jaguar Land Rover had to stop their productions, because some fabrics had run out of materials.
Moreover, if we think about the part when you spend your money on something or make an investment, we can consider the tourism sector, that has been directly affected by it. Some countries are not even allowing that their citizens to come back from international trips! Now, imagine the number of people canceling schedule trips and that are no longer booking flights or hotels…
What is the impact on China?
Let’s start by saying this: China is one third of the world’s manufacturing and is the largest exporter of goods on the whole planet. Even though the chinese government has a plan focused on the internal market, the country continues to have a strong external dependence.
With that, what can we conclude? That one cleary affects the other, what happens in China affects the world and vice versa. As for the direct impact on China, according to analyst Julian Evans Pritchard, from the British consultancy Capital Economics, the real scenario suggests that “the average GDP growth was actually negative by 13% in the first two months of the year”.
And what about USA? Is there already an impact?
The answer is: definitely. Recently, the president of the United States, Donald Trump has confirmed that the corona crises can go through months and that the country could even enter into a recession.
Besides all the economic factor, as the unemployment and the debts that will appear for several citizens. We can also see a political impact. Let’s not forget that the american elections are planned for november of this same year, and yet with no prospects of delay.
Until now, some Democratic commissions have been canceled, which interferes on the decision of the Democratic candidate. And beyond that, we have the Trump scenario. We know that the american stock exchange hasn’t going very well with this situation, so, what will happen to Trump if he hasn’t the economy on his side?
Trump compensates his social embarrassments with the argument that the economy is doing fine while he is in charge. There are two possible scenarios: if he can control the pandemic, he may have even more support as now, but if things continue the way it is, with increasing cases and the health system collapsing, he might even lose the little that he already has.
Let’s remember that USA is a special case and deserves our attention. The health system of this country is basically all paid. Therefore, nowadays the United States has 28 million people without health insurance and 11 million illegal immigrants, what’s going to happen with these people?
What to expect for the future?
Angel Gurría, secretary general of the organization, said in an interview with the BBC that the economic shock is already greater than the financial crisis of 2008 or that of 2001, after the attacks of September 11 of that year. Gurría also predicts that all the world’s major economies will enter a recession in the coming months.
According to the McKinsey consulting, if the a global slowdown, in which the countries have to maintain measures to prevent contagion, even if they control the pandemic, as in the case of China, Latin America, for example, the growth forecasts would be reduced by 38%
What are the recommendations?
The OECD, believes the world should embrace a four steps recommendation. First, everyone should provide free exams to diagnose the illness, better equipment for the health professionals, transfers of resources to workers, including self-employed workers; and postponement of taxation for companies.
Until then, let’s all #staysafe by #staying home.
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The article above was edited by Laura Ferrazzano.
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