Economic Recession Caused by Coronavirus Outbreak
Student’s Name
Institute of Affiliation
The outbreak of the Coronavirus disease has led to an economic struggle in most of the countries worldwide. Countries are facing a drastic reduction in the production, distribution, and consumption of goods because of a global economic crisis. The management of financial matters has been affected by the closure of businesses and industries which support the economy of many countries. The emergence of Coronavirus has brought about an economic recession, which poses a significant threat to the economy. The Gross Domestic Product determines the occurrence of a recession. A recession occurs if there is a decline in economic growth where it decreases by two quarters as measured by the Gross Domestic Product. The occurrence of a recession leads to many financial challenges where individuals are faced with unemployment, and this leads to a lack of necessities. Since the recession that happened in 2008, the Coronavirus has caused another economic slowdown, which has a significant impact on the economy of the United States.
The recession that took place in 2008 had a significant impact on the banking and financial markets around the world. Individuals used their savings during the recession, and a large number lost their homes and became unemployed. It was considered as one of the tough economic moments of the country since 1930. Before the recession, the global economy was not as stable as experts had stated, and this led to the effects of the recession worsening. The subprime mortgage crisis led to the great recession which spread over Western Europe from the United States, where it initially started. By the time the Great Recession began until its end, there was a massive decline in the Gross Domestic Product by 4.3% in the economy. The recession had numerous consequences for the individuals and the economy at large (Grusky, 2011). The Great Recession is outstanding because it transformed the beliefs and behaviors of individuals and institutions.
The Great Recession was a result of granting home loans to individuals with poor credit histories by Subprime mortgages. The lenders of mortgages were looking forward to capitalizing on home prices, which were on the rise. The lenders did not portray strict terms to the individuals who needed the loans, and many people took the credits as the prices of houses were on the rise. Most of the financial institutions decided to take the loans in large amounts with the aim of making tremendous profits after the investments. Suddenly, large companies that dealt with mortgages started declaring bankruptcy. The housing market faced a crisis when numerous lenders became bankrupt after the emergence of new homeowners. This led to less value in the price of homes compared to the loans individuals were given (Verick, 2010). The cost of American households declined, leading to an economic crisis. The introduction of stimulus packages helped in reducing the impact of the recession on the economy.
Economic difficulties in the United States have accompanied the occurrence of Coronavirus. The effects of the economic recession are widespread, and it has affected many individuals. After the lockdown was imposed, economic activities drastically reduced since there was minimal production of goods and services. Efforts to stop the spread of Coronavirus have led to the closure of many business enterprises, which are considered none essential. In the recession of 2008, the economic struggle of the mortgage loan companies was gradually foreseen by industrial experts. The financial institutions played a significant role in the 2008 recession. The recession occurring as a result of the Coronavirus outbreak has seen nearly 17 million people filed initial claims for unemployment insurance over the past three weeks, suggesting that the unemployment rate is already above 15 percent (Stephanie, 2020). The Coronavirus induced recession is for the benefit of individuals so that the possibility of being infected is reduced.
According to the Great Recession of 2008, the economy could not withstand the pressure in the financial markets, and this caused the economic slowdown. This can be seen with the recession caused by Coronavirus. There is a high rate of unemployment since most individuals are staying at home to curb the spread of the disease. This affects the economy because the individuals at home are the same ones who were working and maintaining a stable economy. The difference between the two economic recessions is that the Great recession originated from financial imbalances that originated from the housing sector. The current slowdown is from an external factor that cannot be controlled, this being the Coronavirus outbreak (Louise, 2020). The recession caused by the Coronavirus outbreak demonstrates a massive uncertainty of when the economy will return to the normal state. This also occurred with the 2008 recession, where individuals did not have a specific time frame of when the economy will be healthy.
The Coronavirus has had a significant impact on the economic status of the United States. The threat of the disease has negatively influenced the state of the economy. The workers who were employed in business ventures have been rendered jobless because of Coronavirus. This has led to a reduction in labor supply, which in turn has an economic effect. The economic impacts affect the financial markets through lower valuations and an increase in volatility. “To assess the possible impact of the Coronavirus on the economy, it is important not only to focus on the epidemiological profile of the virus but also on the ways that consumers, businesses, and governments may respond to it” (Andres, 2020). There has been an economic loss as a result of Coronavirus since business investments and international trade are not taking place as measures to fight Coronavirus are being put in place.
The economic effect of the Coronavirus has been felt by individuals globally. Supply chains of some products have been completely broken, and this leaves many individuals without income, which they generated from the business. Most of the factories have been closed, and there is a lack of certain goods in the market. The importation and exportation of products have also been affected since the economy does not allow a trade to flourish at the moment. The production of items such as ventilators locally can help to maintain the economy since there is no need for external purchases. Economists agree that local production of equipment used in fighting Coronavirus will reduce pressure on the economy. Economists are working to find solutions to how they can remedy the situation and mitigate economic constraints.
Most of the firms within the community have been impacted financially by the Coronavirus outbreak. The Coronavirus has been considered as a human tragedy because it has brought a downfall in the economic and financial sector. Most of the business ventures that do not offer essential services within the community have been closed down. Individuals have been urged to stay at home to break the chain of transmission of the virus. The individuals who were operating businesses within the surrounding do not have income, and this shows that there is a financial impact. Coronavirus has had an economic impact on our family due to the closure of the family retail store. The venture was responsible for the provision of financial needs; however, after it was closed due to the Coronavirus, financial difficulties have been experienced.
The period that the economy will suffer is unclear at the moment. The Coronavirus pandemic has brought unpredictable circumstances in the economic sector. Individuals do not know when the disease will be contained since that is when the economic predictions can be made. “The weather forecast seems more predictable than the economy these days. That uncertainty remains, in part, because this current economic downturn isn’t like anything the U.S. has experienced in the past” (Megan, 2020). Experts believe that if the Coronavirus is persistent, the country will have to go into recession. This will lead to a rise in unemployment rates, which will have grave impacts on the economy of the United States. Experts believe that after the recession, it will take a lot of time to revive the economy, and this could be several years. In my opinion, the government should find a mechanism to maintain the economy hence avoiding further economic loss.
In conclusion, a recession has a considerable impact on the economy of a country and its individuals. The emergence of Coronavirus has led to a decline in the economy worldwide. The economic breakdown of Coronavirus has left many individuals uncertain when the normal situation will resume. The economy of the United States has been significantly affected by the Coronavirus. Many industries, factories, and other businesses have closed down, rendering individuals jobless with no income flow. Many individuals from the United States have depended on employment benefits for the necessities. The government has urged individuals to stay at home to reduce Coronavirus spread, which has become a deadly disease. According to the experts, it is uncertain how long the economy will suffer, and this shows how financial institutions have been affected. Individuals hope that the government will find measures to put in place for the economy to be maintained.
References
Andres, V., Christian, E. W. & Divya, V. (March 2020) Centre for American Progress https://www.americanprogress.org/issues/economy/news/2020/03/06/481394/economic-impact-coronavirus-united-states-possible-economic-policy-responses/
Grusky, D. B., Western, B., & Wimer, C. (Eds.). (2011). The great recession. Russell Sage Foundation.
Louise, S. (March 2020). Brookings https://www.brookings.edu/blog/up-front/2020/03/12/how-does-the-coronavirus-pandemic-compare-to-the-great-recession-and-what-should-fiscal-policy-do-now/
Megan, L. (April 2020). CNBC https://www.cnbc.com/2020/04/22/us-economy-not-in-depression-yet.html
Stephanie, A.,& Fransisca, A. (April 2020). Brookings https://www.brookings.edu/blog/up-front/2020/04/15/the-unemployment-impacts-of-covid-19-lessons-from-the-great-recession/
Verick, S., & Islam, I. (2010). The great recession of 2008-2009: causes, consequences and policy responses.