The impact of the Coronavirus on the global economy was frightening and devastating for some Arab and international companies. Economists are waiting to find out how far the virus has spread globally, to determine the economic toll that has taken place in this pandemic.
The evolution of the virus and the global increase in the number of infected people and its economic impact are highly uncertain, making it difficult for policymakers to formulate an appropriate macroeconomic policy response, to better understand the potential economic outcomes and impacts.
The damage to the Chinese economy
The COVID-19 outbreak has led to:
- Disrupting the Chinese economy after its global spread.
- China's economy slows, with production interrupted and global supply chains disrupted.
- Companies around the world, dependent on inputs from China, are beginning to experience production contractions.
- Limited and even restricted transport between countries further slowed the activity of the global economy.
More importantly, some panic among consumers and businesses has distorted normal consumption patterns and created market distortions. The global financial markets were also responsive to the changes and global stock indices fell.
The opinion of international economic organizations on the current state of the economy
The International Monetary Fund said on April 9 that the coronavirus pandemic has caused an economic downturn not seen since the Great Depression.
The spokesperson stated:
For 2020 it's negative, at least as bad a recession as it was during the global financial crisis or worse.
- As the Organization for Economic Co-operation and Development warned on March 23, the virus shock was already greater than the 2007-2009 global financial crisis.
- The Asian Development Bank warned on April 3 that the global cost of the disease outbreak could reach $4.1 trillion.
- The extent of the economic damage still depends on how the virus spreads across Europe, the United States, and other major economies, according to Bloomberg.
UNCTAD noted that:
A slowdown in the global economy to less than 2% this year could cost about a trillion dollars, contrary to what was expected last September, meaning that the world is on the threshold of a recession in the global economy.
Effects of quarantine on the global stock market
The presence of quarantine led to great losses in the global stock exchange, as a result of the lack of trading between investors and buyers.
A decrease in the price of the shares occurred as a result of the decisions of the investors (shareholders) to hold the shares or sell the shares at a price lower than their original price; This is because they fear that the performance of companies will be affected as a result of the outbreak of the epidemic, and thus affect their profitability:
- This decision may lead to the collapse of many companies and the declaration of bankruptcy.
This epidemic has also had a major and fundamental impact on tourism companies, as a result of imposing a ban on flights between countries, thus reducing their profitability:
- This may lead to some companies giving up some of their workers.
Impact of the oil and oil market due to the Corona epidemic
- The world expects inflation to occur as a result of the decline in oil prices (due to the lack of demand for it), and the impact of the global economy on the oil market.
- With oil-producing countries not reducing their productivity by the number required to avoid this inflation:
- It may lead to the bankruptcy of companies operating in the petroleum sector.
- After today's OPEC conference, OPEC announced a cut in oil production by 10 million barrels per day starting in May.
The impact of the Coronavirus on banks and foreign currencies
As a result of declining foreign exchange rates (exchange rates), it may lead to:
- The financial failure of companies, especially in countries that operate under the flotation law.
- Existence of fake profits (when the foreign exchange rate increases).
- The lack of credibility of the financial statements of these companies.
- Consequently, investors fear investing in these companies, which leads to their bankruptcy.
As a result of citizens’ fear of inflation or expected recession, as a result of the outbreak of the Corona virus, and withdrawing their money from banks; led to:
- Banks falter financially.
- This made some banks impose an upper limit on daily withdrawals to deal with this default, and to avoid it in the coming months.
And because countries are closing in on themselves and preventing travel and tourism, this may affect the import and export companies negatively, which negatively affects the economy of several countries.
It also affected the companies that deal extensively with the Chinese market in a very negative way, and has led to the closure of some of those companies, or their bankruptcy. It negatively affected the global economy.
The impact of the Corona virus on the global economy is among the negative effects associated with its global spread. The impact of the Corona epidemic on humans and the impact on global education and its impact on many global countries was catastrophic.
But it gave us an opportunity to grow and develop family communication and build family relationships again. Maybe we can get the economy and the ethics of society back on again after the corona epidemic is over.
