Impact of Covid-19 on the Economy
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Impact of Covid-19 on the Economy
An editorial piece written for the Guardian newspaper by Roubini (2020), discusses how the Coronavirus has affected economies around the world. The author notes that the impact of the virus has been of global proportions, and has resulted in the slowing down of the world economy. The article is of the view that the world economy is in a recession, and if not, that is where it is heading. Investors in financial markets all over the world are suffering losses arising from the current bear markets.
How Covid-19 has affected output
Globally, countries are implementing policies that are aimed at stopping the spread of the virus. International and national administration borders have been closed, and there is limited movement of people and products. Governments in some nations have put in place lockdown measures that require the population to stay at their homes and indoors. Lockdowns have resulted in a decrease in the production of goods and services (Fernandes 2020). The decreasing output is one of the reasons that there are possibilities for recessions in several countries
How Covid-19 has affected interest rates
The virus has slowed output resulting in decreasing interest rates in the major economies of the world (Roubini 2020). Countries are coming up with stimulus packages aimed to kick-start their economies once the virus is over. Interest rates are decreasing in most nations because limited economic activities are going on at the moment. Another reason for the declining interest rates is the need by governments to forestall or mitigate the impacts of a possible recession in their republics (Fornaro & Wolf 2020). It is expected that interest rates will continue declining until the global economy resurges and keeps growing.
The impact of the virus on consumption
Consumption in most nations has been decreasing due to the virus. With many countries being in lockdown at the moment, people are consuming less compared to when the illness had not emerged (Fernandes 2020). Some of the sectors of the economy that are experiencing decreasing demand include tourism, sports, and the transport industry (Roubini 2020). Once, the diseases have been contained. There is a need for governments to come up with policies that increase consumption in their economies.
The impact of the virus on investments
Minimal investments are going on in the world at the moment (Fornaro & Wolf 2020). Investors and governments are uncertain about how long the virus will persist. The current uncertainty existing in most countries decreases the appetite to invest (Roubini 2020). However, despite a general slowdown in investments, some sectors like the healthcare industry have experienced increased investments as governments rush to contain the virus.
The impact of Covid-19 on real wages
Real wages have been decreasing globally. Most industries have shut down, resulting in massive job losses (Fernandes 2020). Some countries have initiated measures that guarantee their monthly population stipends. Decreasing real wages means that people’s purchasing power has reduced (Roubini, 2020). The diminishing purchasing power of the population is a concern that has to be mitigated with the implementation of right policies if recessions are to be averted.
The impact of the virus on work effort
With economies on the lockdown and massive job losses being experienced, most persons are fighting for the few job opportunities available. Companies have been forced to lower wages and salaries for the same amount of work due to the virus (Fornaro & Wolf 2020). This has meant that workers are now being paid less for the same amount of work than before.
References
Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the world economy. Available at SSRN 3557504.
Fornaro, L., & Wolf, M. (2020). Covid-19 coronavirus and macroeconomic policy.
Roubini, N. (2020, March 25). Coronavirus pandemic has delivered the fastest, most profound economic shock in history. Retrieved from https://www.theguardian.com/business/2020/mar/25/coronavirus-pandemic-has-delivered-the-fastest-deepest-economic-shock-in-history