The pandemic outbreak has put a grave effect on different spheres of the life including economic growth, production rate, employment rate, purchasing power, investments and above all deaths in large scale. More than 5 million has been victimized and more or less 3 hundred thousand have been perished. Due to its drastic impact governments have to take precautionary measures by practising WHO recommendations. It is the need of hour to contain the Novel coronavirus as its effects on the world economy are unprecedented. Countries were left with no choice but to went on lockdown. Social distancing has been maintained since its outbreak due to which small scale as well as large scale businesses has been pushed to close or at least to touch the break even. From a cobbler to an industrialist all have gone through unemployment because people were motivated by the slogan of “Stay home – Stay safe ”. It led to decrease in consumers and of course the purchasing power which resulted in decremented revenue. It is observed phenomenon that diminishing trend in demand ever leads to fall in revenue which ultimately results in loss of jobs. According to a report more than 6 million unemployment have been claimed. COVID-19 outbreak caused unanticipated effects on world economy by giving a new direction. For instance, for the first time United States crude Oil price had become negative because US has no more capacity to store the oil coming from the oil fields. The production of oil fields cannot be paused because once it is impeded it may result in loss of reservoir. Most pertinently the US started paying their buyers to accept their oil, or it can also be assumed as pay to maintain the flow of supply chain. Closure of business is of course the major reason that caused the demand for oil to dry up. Economic recession is unavoidable at this stage because COVID -19 effects are heavy in severity and length. It is expected that World economy will face the worst recession during 2020 since 1930s depression.
During the great depression of 1930s markets were flooded with consumer goods and there were no buyers, every component of aggregate demand was in free fall. But COVID-19 brought severe and faster shock to the world economy far more than the 1930s great depression. If we compare the effects of corona on the world economy to that of the great depression it took only three weeks to materialize financial and macroeconomic outcomes while great depression took three years to play. There are several parallels between the 1930s and 2020 depression. The unemployment rate in the US is expected to reach 25% which was observed during the great depression.
World markets and economies will observe continuous free fall unless COVID-19 is finished. Even if the corona is contained, the world economic growth is not likely to be restored by the end of the current year. The world economy will face 3% contraction by the end of 2020 as a result of lockdowns while the US alone will take a hit and its economy will fall by 6%. Natural disaster, economic downturns and monetary crisis are mutually inclusive. These crises leave a pernicious impact on the economy and need to be dealt with at the same time. Medical, monetary and fiscal resources are required to bring the economy to its revival. All we need is to flatten the pandemic curve which will not only save lives but also save our economies. Developing countries should also devise a plan to leverage private and public resources quickly. UNO and other such organizations must be united and come forward to impact the World bank IMF and G20 countries to support the effected nations medically and financially. They should also immediately proceed to the revival of the economy of the victimized countries and should work together to put life to normalcy. At the very step provision of medical aid and waiver or deferment on loan payment for minimum up to a decade must be implemented.
Riffat hanif ( M.Phil English)
Resource Person ( AIOU)
“The Writer, a former Economist and a researcher in Linguistics at present.”