The Long Run Economic Growth Impacts of Pandemics
Infectious diseases still have severe implications in society. The world has been able to handle and fight some of these infectious diseases. However, some remain in geographic regions being endemic, while others spread globally, becoming epidemics or pandemics. In the last millennium, the world has gone through some significant pandemics claiming a substantial number of patients, such as the Black Death, Influenza, and also Ebola, causing substantial effects in economic, social, and political aspects, especially in Europe. Currently, the world is gobbling with the spread and containment of novel coronavirus, which has been declared a pandemic. Pandemic significantly affects the world, causing many deaths but also affect its economy by changing many activities while also affecting trade with other countries and affecting the supply chain internationally. The recent and current pandemics have caused significant macroeconomic effects to the country and global economy through their spread and trade and market integration affecting the capital and labor markets, resulting in economic shocks though in different proportionate and magnitudes.
Specific pandemics have affected countries independently, but the current epidemic of the novel coronavirus is the worst pandemic after World War 2 to change nearly all countries globally. The effects of the pandemic become felt through the response, and containment measures countries are taking in addressing the virus. Countries are rushing to avoid a long term effect of the pandemic, which has a more significant impact on the economy since it has disrupted all functions regarding trade and movement and daily activities. With the pandemic going viral, most of the developed countries though hurting in terms of economic activities, most worry is upon the less developed countries which stand to feel the worst effect of the pandemic regarding their economic and social disruption.
According to the World Bank projections, a pandemic that is considered extreme such as the coronavirus affecting the world right now can have severe effects of a 1% reduction on the Gross domestic product of the world. Most countries that stand to lose due to the pandemics which have historically hit the world are the most unprepared ones in handling the situation and those with the most vulnerable people among the population. Though there is not a way of telling the real effects of the current pandemic, the various projection on the world GDP before the pandemic and after the pandemic show that the economies of the world stand to become moist affected. And will lose a great deal of revenue and income before the pandemic economist had projected the world economy to grow with a 3% increase over 2020 with an estimated GDP of $86.6 trillion. However, after the virus became proclaimed a pandemic, the projected growth of the economy in the world reduced from 3% to 2.4%, meaning that most of the world’s GDP would reduce significantly (Duffin,2020). These reductions estimated from the current pandemic also shows that over history, the economies have been greatly affected. They are considering that most of the world has advanced their responses to the pandemic past pandemics and has thus had a significant impact on world GDP estimates and global economic growth.
World economies mostly thrive through the advancement of the economic activities and, most specifically, the impact the global stock markets have on the economy. The various installed restrictions on movement and many activities coming at a standstill in the worldwide market operations have become unmanageable. The stock exchange indexes are estimated to lose a lot, with countries having to forego a lot of revenue from foreign exchange. One significant cause of demonstrating is the Dow Jones 3000 points fall in a single day since the outbreak, which was the highest fall reported on March 16, 2020, an increase from its previous fall of 2300 points (Duffin,2020). Apart from the stock exchange falling, affecting the GDP projections of the world, the disruptions of the various economic activities also affect the world economy in terms of revenue collections in specific countries changing the international commercial world.
The reduced economic activities in most countries with much effort and concentrations and resources becoming put into battling with the effects of the pandemic and saving lives means that the resulting revenue is not projected into productive activities. Most of the international economic activities such as tourism have become affected by countries crossing their borders and restricting entry and exit of citizens and foreign in bid to contain the spread of the pandemic. These restrictions have affected the generation and collection of revenue by changing significant industries across the globe. One hit industry is the flights of a country with most of the tax collected from daily travel of business and transportation of goods and services halting.
According to the labor market theories, which concentrates on how wages become determined and allocation of different jobs, explain the effects of a pandemic to the population and the economy. The pandemic leads to loss of jobs and leads to increased unemployment, with mostly those who work in the informal sectors of the economy becoming affected the most. The resulting factor of the loss of jobs and increased unemployment is a reduction in productivity and revenues from the governments. The poor are also hit a lot with governments putting more resources also to cater to the needs more than they would in typical situations. With the onset of the pandemic, the economy starts experiencing slow growth and disruption of distribution. Also, the panic from the population causes a reduced supply of products made worse by specific restriction measures taken by the government. The markets are affected by industries production, reducing significantly. Due to the closure of many businesses, the employees result in laying off workers or sending them on compulsory leaves without pay.
For instance, in the United States, the unemployment situation, which was becoming a disaster. Has hit the unemployment situation with the pandemic resulting top 8.3% unemployment rate in the agricultural sector of the United States—comparing the rate of such a developed country and a developing country such as Nigeria, which is far much worse. Shows that pandemic affects poor states in all sectors due to the lack of framework and resources and the weak economies in their countries, which are prone to any shock. Significantly the unemployment rate of all the industries in the United States ranges at a 4.5% rate since the pandemic hit the country (Duffin, 2020). This significantly strains the country’s resources in insurance covers the government has to pay for the unemployed and also the immense resources dedicated to the combating and controlling of the pandemic.
As many industries in a country are not producing, and profits of most of them have reduced, some which have not crossed completely end up slashing a significant wage from the few retained employees. Many in wake to caution expenditure has decided to cut some salaries of their staff due to lack of activities—for instance, the global gaming industry. Most leagues in the world, including the popular ones such as the English Premier League, coming to a halt due to the pandemic the sector is recording a loss in revenue collections. Also, it profits from entry fees in the stadiums. Sporting clubs, as well as other industries, have resolved in cutting the wages of their sportsperson and the staff to avoid the clubs and sector in the running into losses and lack of any productive activity generating revenue.
The health sector is the most affected in most countries due to a pandemic outbreak. A pandemic may result in a surge in admission cases in both the private and public hospitals, increasing the operations and administrative expenditures in these departments. At an estimate of admission expenditure to a pandemic, England incurred 45.3 million euros as a result of the H1N1 influenza pandemic in 2009 and 2011. Latin America also suffered the cost of up to $18 billion in the wake of the Zika virus in 2017 only (Delivorias & Scholz, 2020). Pandemics also affect the health sector regarding the treatment care of some of the pandemic. The continued care and treatment of HIV patients globally affects countries in terms of donations, and the free treatment of drugs of the patients through the distribution of drugs.
Another sector of the economy that pandemic significantly affects is the agricultural and the trade sectors of a country. The transmission of the moist reported pandemics significantly affects these sectors. They affect the country’s productive population and the labor force and also animals. The contaime3nt of the disease affects the supply of farm and animal produce, reducing the significant amount countries collect from these international trade. Countries that rely on such activities to run their economies, such as the African nations, are greatly affected and lose a lot during the pandemic times. The pandemic also affects exports of the developed countries to the affected African continents, impacting negatively on the trading patterns in the world.
As wages of the employees get reduced, the purchasing power of the population reduces, and this causes the few commodities in supply to increase in price. The effects generate moving in a manner likely to form a cycle of the impact since one effect causes the other, and all are dependent on each other. The high prices hurt the already increased population and come from the reduced production activities and closure of markets generating losses in the economy and also on an individual level.
The effects of the pandemic in the economy lead to a reduced output level and affect the growth rate of a population. The considerable and significant number of people affected means that the pandemic reduces the people available to engage in economic activities. Also, the number of unemployed implies that the number of commercial operations from the reduced and affected industries reduces affecting the amount of economic output in a country. Apart from changing the production of the global economy, individuals’ capability to save is cut. Since massive layoffs of jobs and the uncertainty of the pandemic ending causes people to use the savings they had and disrupting their plans for investing. Meaning that the economies of the world’s ability to attract investments that spearhead the economy also reduce, and many projects halt prolonging the project periods costing the world much expenditure (Jordà et al., 2020). Most of the African countries depend on aids and loans to run a significant amount of industrial and development projects in their countries. However, due to pandemic, they drain their reserves kitty. The loans accrue more loans, and since most economic activities are not ongoing, the interest rates accumulate from defaulting the credits, which dramatically impacts the economy negatively. The effects may spill over even after the end of the pandemic.
Consequently, the pandemic not only affects the economics of the country but also affects the wellbeing of the society band the lives of the population. The H1N1 pandemic of 2007 and 2011 had more consequences since the countries mainly from the developing economies experienced a setback in their growth rate, which some are struggling to come from till date (Delivorias & Scholz, 2020). The country which most perennially experiences the virus is continuously in poverty requiring donations to carry out its operations and feed its nations.
A substantial number of the population is affected. The history of the occurrence of world pandemics is associated with claiming a lot of lives with the pandemics such as the Black death affecting and causing a lot of deaths of around 2000000 persons (Delivorias & Scholz, 2020). The deaths have more devastating effects on the loved ones affecting them emotionally and also may cause other underlying diseases such as stigmatization. For instance, the blame is happening due to the Coronavirus pandemic on racial grounds. May lead to victimization of certain people of causing it and thus causing stigmatization. The population is reported to experience fear and panic due to the break of pandemics, causing people to disrupt their social, economic, and political activities. With the controlled measures of the pandemics, which are very infectious, people’s ways of life and cultures are disrupted. Various customs and cultures are also disregarded. Worship and congregational meetings places of worship have seized since the break of the coronavirus as a measure of controlling the crowds to avoid the full spread of the virus.
The measures that governments take in limiting movements in their specific geographical areas affect many livelihoods in the transports sectors and also those in the informal sectors. The effects are that levels of poverty increase and, any people become extremely in need of food help, and hunger threatens most of the countries. Violence in the community has been reported to rise, especially domestic violence, due to the effects of containment strategies of the virus. The disruption of the usual way of life and activities in public affects many things, not only the wellbeing of the people. Now more than ever, people fear to develop the usual ordinary cough. Since one is likely to be thought of having the novel coronavirus. And become distanced and taken to isolation centers which, if they are not taken care of in terms of psychological effects from the isolation centers, one may end up having severe health issues more than those caused by the viral pandemic.
Many people, due to pandemic effects of the economy, feel these effects on household levels through their inability to meet their daily needs due to various restrictions. Daily business such as shops and other companies such as restaurants become closed. Lots of companies are closed, and massive unemployment is experienced. The ability of one to pay loans and that of the country too is affected by the returns on assets, also diminishing significantly and investments losing values (Duffin, 2020). Due to loan defaulting and the restrictions, the interest rates rise, and some people risk losing their properties due to delayed mortgages and also loans repayments burden.
However, the effects of pandemic vary and may be felt in the short term or may become long-term effects on the economy of the country and the world. The effects arise from changes in labor markets and capital formations due to the widespread infections from the pandemic. The short terms effects occur from the mitigations and containment strategies while the long-term effects arise from the government’s interventions using the fiscal measures in countering the pandemic. The results are felt differently in each country’s growth and development of institutions and the mode of economic activity in a specific country. The pandemic outbreak can affect the benefits of a countries economy—the WHO estimates the strength of the pandemic to cause effects on the food security of a nation. The Ebola epidemic in Guinea, Liberia, and Sierra Leone rendered the previous economic gains of these countries zero by taking a considerable amount of their resources to contain their spread and mitigation process (Jordà et al., 2020). Therefore considering the vast economic burden countries face. And the significant loss of lives reducing the labor supply of the country most states are taking different measures in curbing the spread of the pandemic while others are collectively taking similar steps to stop the spread of the pandemic which is yet to have a vaccine.
Governments are putting all efforts to balance their measures in cautioning economy and public from the harsh effects of economic disruption and also measures in containing the spread of the virus. Globally, countries are initiating lockdown, cancellation, or restrictions of all movements in and out of their countries from people. Though this may become effective in, contain ni ng the spread of the virus, the economic activities are greatly affected. For instance, the lockdown measure in the Wuhan province has helped the Chinese government manage the virus considering this is the place where the first incidence became reported (Jordà et al., 2020). However, these measures lead to the closure pf various economic activities such as the closing of schools, which also disrupts the transport systems. Countries are experiencing revenue loss, which would become hard for them to cover even after the pandemic. Some states would recover from the adverse effects of economic growth, especially the European countries, due to their development and diverse economy. In contrast, most of the African countries may find it difficult to recover from economic growth reduction due to the specific commercial and trade-driven economy.
Countries in the wake of a pandemic take political measures of legislating measures in protecting the public health in trying to strengthen the institutions put in place to handle such cases of the outbreak in the future. European countries, through regulations such as those put in place during the Influenza and Ebola, enable the country through there emergency response strategy to become well equipped for future occurrence of the pandemic (UNDP, 2020). For instance, the novel coronavirus, which has no cure, currently has seen many European countries commit a considerable amount of money in putting put structures. And management controls response measures in analyzing, managing, and understanding the virus as they try to come up with the virus. These measures help and strengthen the preparedness of the countries in the future occurrence of such pandemics. The WHO recognizes that readiness, the management, and advancement of the response structures and health facilities help in managing the pandemic (Delivorias & Scholz, 2020). However, countries such as the African continent cannot carry out various response measures and only end up committing their revenue in fighting the pandemic and not strengthening the health facilities for the capacity to fight and handle such cases in the future. These efforts may succeed in the short term, but in case of a reoccurrence of the pandemic, the countries would not become capable of handling the pandemic on their own and will still need help.
However, most of the countries in a bid to caution the effects of the pandemic on the wellbeing of the public are providing various incentives and appropriating specific amounts to multiple sectors to caution it from the impact of the virus (World Bank, 2020). These measures only help in reducing the losses experienced by the loss of unemployment and reduced production. Still, the efforts need a collaborative and collaboration from the public in observing the set rules by the WHO in combating the spread of various viruses pandemic.
Consequently, the pandemic nature warrants for extreme measures in combatting its spread. Since they have no cure yet, tackling the spread in its initial and early stages may caution the economy and the country to become able to avoid the numerous economic shocks. Most of the effects get felt in the short term, but if no steps are taken at an early stage of the virus when it gets out of hand, it can have long-term devastating effects on the economy and also on the health of the population.
References
Delivorias, A., & Scholz, N. (2020). Europarl.europa.eu. Retrieved from https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/646195/EPRS_BRI(2020)646195_EN.pdf.
Duffin, E. (2020). Topic: COVID-19: Impact on the global economy. www.statista.com. Retrieved from https://www.statista.com/topics/6139/covid-19-impact-on-the-global-economy/.
Jordà, Ò., Singh, S., & Taylor, A. (2020). Longer-Run Economic Consequences of Pandemics. Federal Reserve Bank Of San Francisco, Working Paper Series, 01-16. https://doi.org/10.24148/wp2020-09
UNDP. (2020). Coronavirus disease COVID-19 pandemic | UNDP. UNDP. Retrieved from https://www.undp.org/content/undp/en/home/coronavirus.html.
World Bank. (2020). Pandemic preparedness and strengthening health systems. World Bank. Retrieved from https://www.worldbank.org/en/topic/pandemics#3.