Effects of COVID-19 to the Global Economy
Introduction
Corona Virus disease (COVID-19) is a global pandemic that originated from China in 2019 hence the name. Though the perception was that the virus would be localized in China, it was moved to other parts of the world by people. The virus has affected and crippled some different sectors of the economy either directly or indirectly. Some of the variables of the economy that have been affected by COVID-19 include national output, interest rates, consumption, investment, net wages, and work effort. This has greatly interfered with economic equilibrium in both the household level and the aggregate economy as discussed below.
Output
Output in individual sectors of the economy and the aggregate gross domestic product (GDP) is projected to decrease due to the negative impact of COVID-19 pandemic. The crisis befalls most sectors like tourism and trade which are major contributors to any country’s economy.
Interest rates
COVID-19 crisis has led to increased expenditure by governments in different parts of the world. In turn, interest rates from financial institutions have reduced. The lockdown of economies has created conditions in which private sectors demand for a loan have fallen.
This in turn has led to a downward effect on interest rates.
Consumption
Revisions on the consumption sector have been made due to the COVID-19 pandemic. Consumption is expected to reduce due to the closure of some sectors of the economy. Some employees in various sectors have been laid off while others have been forced to take pay cuts. This has respectively reduced the purchasing power of consumers all over the world.
Investment
The impact of the pandemic is negative across the world. UNSTAD projected FDI flow in Africa to decline by between 30% and 40% during 2020 and 2021. This is due to the rapid deterioration of global prospects and global shocks from the pandemic. This has affected investment from prospective investors all over the world. It has become a challenge because different economies of different countries are under lockdown. Consequently, savings have reduced. This is because of a reduction in income inflow making people consume the savings thus leaving a little or nothing for investment. Many potential economic sectors have been affected negatively.
Real wage
Economic analysis shows how firms insulated their employees against market fluctuation. With COVID 19 pandemic, the shock has been so severe to firms. Some firms have forced their employees to take pay cuts while others have suspended their employees indefinitely. This has become a burden to the government of respective countries as they are forced to divert economic resources on non-economic development programs such as food and transfer payments to the people
Work effort
The demand for and supply of labor in the market has been affected by COVID-19. the pandemic is pushing many families in the world into poverty and increasing existing inequalities. Furthermore, many employees are being forced to take lower pay than the effort they are putting in. this is a result of many firms trying to remain in the industry even if it means to break even. This has consequently lowered employees living standards.
Importance
Within this impact and complexity, COVID-19 has made some matters to be the center of interest to nations all over the world. This includes effective strategies on economic growth and development, effective health communication, and the necessity to prioritize pandemics whenever they arise. In conclusion, the shock has caused negative dynamic impacts on both micro and macro-economics, in both developed and developing nations. A solution to the malady will bring relief and high hope of economic recovery and hence equilibrium in the long run.
References
https://www2.deloitte.com/global/en/insights/economy/covid-19/heart-of-resilient-leadership- responding-to-covid-19.html
https://www.iata.org/en/iata-repository/publications/economic-reports/coronavirus-initial- impact-assessment/
https://www.japantimes.co.jp/news/2020/03/02/business/asian-factorieschina-
pmi/#.Xl4HA6hKjMw.