Coronavirus, an epidemic that began at the depths of China’s Wuhan province has been spreading rapidly resulting in sickness, death and crippling the global economy as it spreads further. The dystopian reality of empty airports, hotels, and restaurants around the world is damaging the hospitality sector immensely. Over the last few centuries, higher interest rates have normally been the cause of a recession and never a virus. As countries struggle to quarantine and fight covid-19, a global economic fallout of more than two trillion dollars effectively putting the global economy in freefall is predicted by Bloomberg Economists.
Effect on Indian Economy
India is one of the top 15 countries which is affected due to the slowdown of manufacturing in China and the trade impact is measured to be about 348 million dollars according to a report by the UN. The trade impact in India is less when compared to other economies such as the United States, Japan, China, and South Korea.
India’s economy has been on severe slowdown for the last few years, reaching a six-year low at 4.7 percent last fiscal year. The economy was on a recovery stage but the coronavirus is weighing down, disrupting the hospitality sector and industries as India tackles more cases to stop the spread and contain the virus. Economists predicted growth for the last quarter fiscal year but the hopes of a rebound are now fading as coronavirus spreads, and new revisions are made on the growth forecasts earlier predicted by analysts and economists.
Effects on Global Economy
According to S&P Global, a credit rating agency that is responsible to determine credit ratings of private companies and governments around the globe stated that covid-19 led a severe disruption and the damage is more prevalent in the United States and Europe. In the United States, the Federal Reserve cut federal-funds by 50 basis points and other private and government banks are aggressively increasing their interest rate to contain the disruption.
President Donald Trump signed an 8.3 billion deal which focuses on vaccination and health measures against coronavirus. As no vaccines or drugs are available as of yet, China’s aggressive measures to mitigate the spread have been successful so far, though they have been under criticism for secrecy and initial missteps. The U.S benefitted from China’s aggressive steps, but it underestimated the spread and its initial action was disorganized and slow.
The number of people infected with coronavirus has surpassed more than 116,000 worldwide and the consequences can be felt for every major economy as flights are canceled, businesses are closed and strict quarantine measures impact trade. Italy is the most affected country, in the European Union, with a death toll of more than 2,500 and strict quarantine measures being put in place. Italy’s government debt and unemployment are relatively high when compared to the rest of the E.U and the levels of government investment are lower, all of these factors coupled with the onset of covid-19 will affect the economy of Italy adversely.
The output of the manufacturing and service sectors in China decreased severely last month. The drop in manufacturing in China can be a cause of a global financial crisis as China is a major exporter all over the world. Borrowing might rise and financial condition tightens and many businesses might not be able to repay their loan on time. To contain the damage, the International Community must come together and help countries that have limited health capacity avert a humanitarian crisis.
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