The Economic Effects of a World Pandemic: What to Expect
Unless you have been completely cut off from civilization and living under a rock without
access to cable or the internet, you should know that we are in the midst of a worldwide
pandemic that is nothing short of a global cataclysm: The Coronavirus.
It is the most recent example of a global pandemic that has brought the world to its
knees.
Nations are held hostage by this faceless enemy, and despite the best efforts of our
governments, we have seen just how devastating it can be.
I must say here that I salute the efforts of each and every one, who is struggling and
working hard to cope with this dire situation.
From doctors who are putting their lives at risk on a daily basis and some have even sacrificed
their lives, to the government officials, everyone is a hero!
Even the ordinary folks who are trying in their own way to stem the spread, I salute
you all.
A pandemic of this magnitude is sure to leave a mark that won’t be erased any time soon.
It might be difficult to bounce back from the changes this pandemic will bring in our
lives and economy.
At least it won’t be possible to recover in a short period of time.
Already, governments around the world have put in place economic plans to help their
citizens get through this period.
As health and medical intervention includes a stay-at-home order/campaign, the world economy
is facing an attack that is very similar to a global recession.
Businesses and organizations are shutting down; many people are losing their jobs and
the source of their livelihood.
Oil prices are plummeting, and food prices are escalating.
In fact, the OECD estimates that the pandemic could weaken global growth to around 1.5 %.
As countermeasures are implemented to end this pandemic, experts predict that the economic
fallout could spillover beyond the immediate impact, and for nations that don’t have
an economic plan in place, disaster looms.
Today I have made a list of things that you can expect to witness during a global pandemic,
and how they will shape the economy of the world.
I’ll also be sharing a few tips on how to stay afloat financially during these tumultuous
times.
#1: False Information Whether we like it or not, false information
is out there, and for those who do not know how to, or care enough to filter the truth
from the lies, it’s very easy to make bad decisions based on the wrong or fake information
spreading out there.
History has shown us that in the times of crisis, information is obscured from many;
hence, you should expect it now too.
When I talk about false information, I am not referring to only the information concerning
health policies, precautions, fatality, or others, but also the information regarding
the financial implications of the pandemic.
#2: Stock market crashes It is natural for the values of a lot of stocks
to crash during tough seasons.
During the last great recession, stock prices crashed to such low points that some people
would have given them out for a few dollars.
While we don’t expect this pandemic to injure the world’s economy to that same magnitude,
we expect to see a lot of crashes in stock prices in the coming days.
This will mean a great loss for many stockholders but could translate to a potential gain for
those who may decide to buy crashed stocks and hold them in the hopes that they would
rise again in the future.
#3: Delays in shipment and deliveries If you are into online shopping or the importation
business, you should be aware of the announcements made by several wholesalers and retailers
regarding a delay in normal delivery times, and also a corresponding increase in shipping
costs.
This is already affecting the prices of local and international goods as sellers are seeking
to recover their money from the goods.
If this pandemic holds for a longer period, there is no telling how much more it could
affect the shipping business.
Already, ships are being stopped at the seas in an effort to stem the spread of the virus,
and this is definitely causing a queue to pile up.
If governments do not intervene to improve the speed of checking and disinfecting the
ships, then essential goods like toilet paper, soaps, alcohol-based sanitizers, food, and
drugs may not be available to everyone.
This will slow down supplies to local vendors and, therefore, increase the price of such
items.
#4: Panic buying People are panicking and buying the essential
items they may need during the lockdown period.
Many cities around the world, especially those bracing to fight the virus, are already experiencing
this.
This may mean well for sellers; after all, they are selling more items and turning more
gains, but it is also creating an unusual demand that may not be met given that most
of the production industries have been shut down for the time being.
And in economics, when the demand is far greater than the supply, prices of commodities sky
rocket.
#5: Unavailability of loans Some countries are in need of financial aid
in the form of loans to fight this virus and still keep their social order in place.
Before now, loans were not easy to land; right now, it is even more difficult to get personal
or business loans.
Each country in the world is rolling out a form of financial intervention to help its
citizens cope with the harsh economic impacts.
Countries are spending billions of dollars to do this, and it would be an unwise and
potentially dangerous action to spare loans for other countries, especially when the resources
are getting depleted.
Loans are now scarce, and this may reflect on the decisions that many leaders in poorer
countries have to make in the coming days.
#6: Problem with loan and debt servicing Similar to the scarcity of loans is the problem
with loan and debt servicing.
Health investment is surely taking priority right now, and for countries who have to service
loans and debts, this could be a big problem.
As no leader would leave his or her country to suffer avoidable deaths, they could choose
to use the money meant for loan repayments to fight the pandemic.
The countries or financial institutions that gave the loans originally may be in for an
extended repayment time.
This is also going to be a bad time for health insurers, as they may have many clients on
their hands to simultaneously care for.
#7: Reduction in revenue generation (tax and others)
The government has to spend money on fighting this virus, and also help palliate the effects
and give citizens a soft landing.
But in addition to this, there is already a reduction in internally generated revenue
(which is one of the major ways that the governments obtain funds for their projects).
Businesses have shutdown, salaries are on hold in many places, and most people are not
earning any taxable income.
There is also a reduction in the daily activities that bring in money to the government.
Simply put, there is little or nothing coming in to sustain the fight, and governments may
have to draw on their reserves in order to keep up with the current situation.
This is going to create a huge dent in the coffers of many countries, and it may take
many months after the virus is totally dealt with for them to recover.
#8: Increased unemployment rate Recently the President of the U.S., St. Louis
Federal Reserve, stated that the unemployment rate could hit 30% in the country, as well
as the economy getting hit to the tune of about $2.5 trillion.
Most of the jobs have shut down during this period, leaving many people without a regular
job.
It is also going to be difficult in the first few weeks when the jobs reopen because there
may not be enough business to demand many workers.
People who work casual and construction jobs could be hit the worst during this period.
#9: Adjustment of schedules and deadlines As jobs have closed, there may be issues meeting
up with deadlines and schedules, especially for those businesses whose staff cannot work
from home.
Orders for items are left hanging, production has been halted, and nobody knows how soon
it would resume.
This is also going to affect the economic situation further with respect to the availability
of goods and services.
#10: Travel restrictions Just as goods have to be moved, people also
have to travel.
Airline companies are seeing a massive plummeting of flights as a result of the travel ban and
restrictions placed by many countries.
Flights are being canceled all over the world, tourists can’t visit beautiful places anymore,
and businesses are feeling the pressure.
This is impacting the economy in no small way.
In its official statement, the Bank of America, on Thursday, 19th March, said that it was
“officially declaring that the economy has fallen into a recession” and that it was
“joining the rest of the world, and it is a deep plunge.”
The Bank further stated that “jobs will be lost; wealth will be destroyed and confidence
depressed.”
Part of the statements also warned investors that the recession isn’t coming –it is
already here.
It was further added that the economy is expected to collapse in the second quarter and also
to shrink by as much as 12 %, and for the GDP to reduce by at least 0.8 %.
We are staring at a disruption in the world’s economy, a massive unemployment increase,
and an increase in the demand for essential goods and services.
The prices of the latter are expected to go up if things do not improve.
What to expect during this period?
As we cooperate with the government to help end this pandemic, there are a few things
I would like you to expect during this period.
#1: Working from home A lot of businesses have been trying to make
it possible for some of their staff to work from home or other non-office environments,
and this period seems like the perfect time to implement this.
You should expect to see more work-from-home jobs as well as an increase in the number
of jobs contracted to freelancers.
This is going to happen because businesses need to hold some form of productivity in
this period.
#2: Government intervention As I mentioned earlier, we should expect government
intervention to liquidate the economy.
A government is only as strong as its economy, and every responsible government has to put
plans in place to help its citizens through these tough times.
Loans and grants to rebuild would be fairly easier to access after this period, and business
owners can expect to have something to fall back on.
#3: More DIY products As it becomes more difficult to access some
items, people are going to resort to a Do It Yourself approach.
For example, hand sanitizers are becoming scarce due to panic buying, and as an essential
item during this period, people cannot afford to do without it.
Many people are already resorting to a DIY approach and making their own sanitizers at
home using regular alcohol.
#4: Losses for some, gains for others This period will be over someday soon, and
when it does, there is going to be a shakeup in the ranks of winners and losers, especially
in the stock market.
Already, some stocks are showing bullish runs while others are on a bearish run.
The world is facing an unprecedented situation, and only the adoption of strict measures can
ensure our survival without permanent damage.
Already, many things have changed forever, and this year will go down in history as the
one during which the world nearly ended.
The top economic powers of the world are not left out of it.
The biggest and strongest economies are losing money in multiple ways, while the poorer countries
are struggling to raise enough resources to combat the pandemic.
Our world is being changed forever.