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Corona Virus and its economic Impact

 

Economic Impact of Corona Virus

Effect On the Source Country: China

As corona virus spread around the world, most of the world’s companies have experienced a broken supply chain, disrupted manufacturing, and a decline in the demand for their wares. Since it first broke out in China in 2019, corona virus has had adverse effects on the global economy. However, analysts’ casts doubt that the virus could cause several economic damages like the one that followed the 2008 Lehman Brothers investment bank failure. 

Over the last 30 years, China’s economy has been growing slowly due to its trade war with the United States. According to economists, 4 million jobs might have been lost in China during the year 2019. And this year is considerably worse for the country due to the thousands of new infections and deaths from the disease. Coupled with other economic challenges effects of the disease, it is threatening to slump the country’s economic growth. 

Recently, Reuters interviewed some economists, and most suggested that China’s growth rate would likely slump to 4.5% in the first quarter of 2020, unlike the 6% in the previous quarter. This would be the slowest economic growth rate amidst an economic and medical crisis. 

A week ago, Chinese president Xi Jinping also warned that the virus would have a significant impact on the society and economy. But he added that the disease would be controllable, and the government will step up efforts to combat its spread and fatality.

Standard Chartered also adds that corona virus can affect up to up to 42% of China’s economy. This crisis will be fueled by most companies struggling to pay loans to lending institutions, which could increase non-performing loans to excesses of $1.1 trillion, according to Poor’s and Standard. The impact has also started manifested based on Chinese airlines who have grounded their planes and who’ll likely lose up to $12.8 billion in revenue.

Effects on Other Economies

Besides China, corona virus has also adversely affected the global economy. The majority of the world’s biggest companies, such as Apple, Microsoft, United Airlines, and MasterCard recently announced how the virus had affected their consumer behavior and business. The announcements by these global economic giants and their responses will determine the extent of the economic damage by this virus.

Some companies have also remained optimistic that the governments will put in place measures to curb new infections and that the virus will not affect consumer spending in North America and Europe. But if these executives feel that the virus could extend beyond the first quarter of the year, then they may start laying off workers in affected countries and further worsening the economic damage. 

And while the giant companies are affected by this menace, the stock market fell rapidly this week, suggesting that investors should be ready to handle more bad news.

Michael O’Rourke, a chief marketing strategist at JonesTrading, said: “Everything is slowing down- even more, and that has not been fully appreciated.” 

Another big concern also is that the virus could quickly spread in the US and Europe. The spread can force many consumers to stay at home and avoid work. This will rampantly affect stores, restaurants, and other businesses, therefore, affecting trade. 

Even before the corona virus spread in the US, some business investments were already pallid in the country. During the last three quarters of 2019, it fell, and analysts are predicting a reduction in spending among companies in the US. 

While new infections of the corona virus continue to be reported in different countries around the globe, it remains a hard question to analysis on its full impact on the global economy. So far, it’s been disastrous to the economies of affected countries, but there have been measures to reduce these effects. Only time and effort of combating the disease will determine the extent of economic damage caused by this menace. 

The writer is a nurse by profession and an experienced writer. You can visit her profile https://www.fiverr.com/daphnemurray to order your article

 

 

 

 

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