The Virus That Is Disrupting The Global Economy

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The Virus That Is Disrupting The Global Economy

The intensity of the effects of Corona Virus has only increased since the news of its outbreak. The familiarity of COVID-19 outbreak in Wuhan, China has now grown internationally. It has rapidly caused a domino effect not only on the health front but also on the economic front globally. The pandemic is proving to be one of the deadliest, if not the deadliest. The fear mongering is such that countries like India saw a shortage of sanitizers and masks even before there were cases reported.

The count of the total global infection is imprecise as is the death toll. There is an ongoing comparison with pandemics that occurred earlier. But with the uncertainty in the numbers it is difficult to come up with a conclusion. Also, the advent of widespread passenger air travel and much deeper global supply chains are to be blamed for the severe international crisis.

Previously, the pandemics were bad and caused more harm to life which hammered the economy. Comparatively, COVID-19’s economic effects are far worse and have already outstripped the pandemics occurred earlier, whereas, the health effects are milder than previous pandemics.

The schools and offices in various countries have already been shut down. Bans have been imposed on tourist arrivals almost globally which is strangling tourism and will have adverse effect on businesses. Imports and exports are paralyzed which might lead to shortage of supply and an increase in prices. Globally, the airline industry is set to lose $29bn, according to the International Air Transportation Association (IATA). An overall economic disruption is foreseeable and inflation may get worse than ever.

 

The stock markets globally have drastically dropped thousands of points wreaking havoc. Activities like manufacturing, production and business have either stopped or ground to a halt. As a consequence there will be a global slowdown which may put further downward pressure on the stock market. The Indian stock markets saw a distressing crash which makes it difficult for the investors to take decisions, as did the stock markets of various other countries, almost at a similar magnitude.

The bearish markets are ought to last for an indefinite period. What is slightly comforting is that the markets will get better once the outbreak is under control and the cases of people infected are reduced. The import and export will commence as well as the ban on air travel will be lifted giving the businesses a breather.

What investors need to do in this situation is restrain from panic buying or impulsive selling. Avoid taking additional exposure. Taking calculated approach and not stopping their SIPs as they might lose out on the lower rates would be a prudent thing to do.

The phenomenal interdependency of the countries has led to the devastating destruction of global economy in such a catastrophic manner. But the studies on previous such pandemics provide considerable confidence that the market will bounce back as soon as the coronavirus detracts.

Shahera Qureshi
Sushil Finance

Has rich experience as a content writer. She has worked with Bombay Stock Exchange (BSE) and has graduated in BMS. She is an avid reader and has impeccably proficient research skills.

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