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The impact of COVID-19 to the global economy

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By Afshan Lalani

As we observe the lock down of malls, streets, cities and countries to curtail the spread of COVID-19, there is continuous risk on how these actions will affect economy of the country and the world as a whole.

UN has estimated that the global economy will face a trillion dollar loss due to COVID 19.

“We envisage a slowdown in the global economy to under two percent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said Richard Kozul-Wright, Director, and Division on Globalization and Development Strategies at UNCTAD.

In coming months, there will be pressure on debt payments by developing economy, job losses due to economic crises and shortage of basic food and necessity items as there will be immense pressure on supply chain.

Facebook has recently announce to support 30,000 small businesses with grant enabling businesses to survive from the aftermath of COVID 19 incident. Many governments are coming up with financial and grand proposal for businesses so that there is a business continuity rather than downsizing.

In the coming quarter, consumer will be spending more on necessity rather than luxury goods like cars, vacations and accessories. This reflects that there will be low volume on car sales, record losses in tourism, which will affect airlines, hotels and other tourism provider. Furthermore, expensive accessories like branded apparel, phones and other goods will see low sales.

It is also likely that there will be serious melt down of savings or high debt due to loss in jobs and low earning. All these will further decrease the interest rates. Global manufacturing will take some time to come back on full scale production and supply chain to come in full swing.

Overall, the industry slowdown will give room for innovation, competency and growth in recession.

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