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.