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COVID-19, SARC CoV-20 or Corona virus a name that had overpowered all the news headlines from December 2019. It has affected at least 185+ countries with 20 million infected and 114000 deaths around the world. As the whole world is having a bout against such pandemic, lockdown have been imposed by most of the countries hit the economy of mostly all the countries.
So the economic trends before COVID, current situation and awareness of forecast of the aftermaths is necessary stagger the economy with least time taken and efficiently. Awareness of trends during Spanish flu(1918-19) which took lives of 40-50 million people around the world will prove to be a bane if effectively perceived.
HOW COVID AFFECTED ECONOMIES:
The haze of the pandemic has given a turnaround to different areas of the economy. The sectors like crude oil, industries, transportation, tourism etc. have witnessed a sharp decline in their business and some of them are close to bust. While the companies like OTT(over the top media services) as Hotstar specials , Amazon prime ,Netflix etc. ,manufacturers of basic necessities (food and medicine)have witnessed a considerable hike ,also the telecom sector have witnessed 50% hike in data consumption than usual.The effect of the pandemic to the major sectors are listed:-
CRUDE OIL: On 14th September 2019, due to the Yemen’s drone attack to the Saudi’s oil processing facilities led in hike in oil prices( as 5.7 million barrel per day cut , 5% of world’s daily production). This resulted US crude hike to $60.46 per barrel and Brent to $68.06 per barrel. While such high price didn’t last long as corona virus took Centre stage and sharp decline in price was seen. By 18th March it touched to its 18 years low price with a jolt, US crude to $24.44 per barrel and Brent oil to $27.31 per barrel. OPEC+ countries (Oil and petroleum Exporters Countries with Russia) called off a meeting to cut its production to 9.7 million barrels per day, to boost the oil prices. But the deal was initially refused by Russia as it saw it more favorable to US based oil processing facilities, marking price war between Russia and Saudi.
But on the meeting held on 13 April 2020, OPEC+ countries agreed to cut off the production of 9.7 million barrel per day to meet the demand supply curve. But the step was too late and on Monday i.e. 20 April 2020 it has witnessed negative price $35.45 per barrel i.e. suppliers will pay money to buyers to take their crude oil. This is because of two reasons:
1. Lack of storage.
2. Expiry of barrel overhead.
They can’t stop production because restarting process will be costlier than the money they are paying too get their hands off from crude oil barrels. This jolt to the crude oil market is because of the delay in decision making and market is now expected to recover as soon as lockdown gets over and demand will increase sharply as supply has already been cut to stagger the prices.
Airlines: Civil Aviation is the one of the most affected sectors which has shown a jolting effect due to COVID-19.Airlines have been struggling from late 2019 to check its cash flow, as people started avoiding air travels and authorities took precautionary measures. Subsequently most of the aircraft went grounded (80%of the total aircraft) ,domestic as well as international flights, after the lockdown has been imposed worldwide. Aviation sectors nourish 65.5 million people by providing them jobs, 10.2 million directly and rest indirectly (most of which are induced or tourism).
Tourism is the sector that heavily relies on Aviation. Civil Aviation contributes to 3.5% of global GDP, which constitutes $2.7 trillion.
During this severe situation, most of the airlines have sent its employees e.g. GO AIR to unpaid leaves and some cutoff the salaries like INDIGO AIRLINES. Airline sector was bearing loses earlier are about to bust if government policies wont favor or provide financial aid.
Countries like New Zealand, France, Sweden and Norway have announced a sign of relief funds to airlines ensuring loan guarantees and tax rebates. While some countries government decision are pending including India in providing assistance. The government would need to commit $300-$400 million to get all aircraft back in air. Indian aviation need early government assistance as condition of aviation was alarming earlier as well. MOST OF THE AIRLINES WILL GO BANKRUPT BY MAY WITHOUT GOVERNMENT ACTION, according to CAPA(global aviation consultancy.
MANUFACTURING INDUSTRIES: This sector constitutes of lions share in global economy i.e. 16%, $14.56 trillion of 91 trillion approximately. Conditions started getting worse as manufacturing have been halted due to lockdown.Firsltly this sector is somehow responsible for the worst condition of the countries in terms of death toll , this is because of uneven time of infection in different countries as:
1. China was first to get hit by the virus, imposed lockdown, and started manufacturing in February itself.
2. USA and Italy was affected later and their haste in coping up supply led the virus broaden its roots.
It’s a matter of fact that the whole world will be under recession, according to WHO report, millions of jobs will be lost. India and China will be the only countries with positive growth rate of 1.9% and 1.6% respectively. The government policies should favors small and medium industries. As the lockdown not only boosted the expenses but also the pressure and coping the supply.
Taking example of India , during the lockdown , industrialists held a meeting and asked government for reopening the industries with 50% work force, as they are in fear of loosing international market to China (11% of India’s GDP is from exports).
Secondly, some Indian policies should be at moratorium for at least six months to favor the industries that will or can move towards liquidity, as INSOLVENCY AND BANKRUPCY CODE (2016) which give power to creditors to get their funds back, if industries failed the company is declared bankrupt. Apart from it countries should work making flexible policies making it easy to trade and attract foreign investments.
Medicare services: In recent months, this sector has witnessed flooded investment to counter the epidemic. Almost every country is spending at acme of their potential to carry out the tests (because in most cases of the demise, delayed treatment was the reason) , treatment procedures, development or importing of PPEs , arranging medicines , supply of food during lockdown , development of necessary technologies etc.
This varies from country to country that to what extent they can invest based on their economies. Some countries are using their own funds while some are dependent on some International organizations for their revival from the pandemic. Organizations like WHO, Asian Development Bank , International Monetary fund (IMF) etc. Some organizations that are providing aid are:-
1. United Nations released $2 billion to vulnerable countries to fight against COVID , also many other deals offered to help the poorest countries to fight against the pandemic.
2. World Bank approved $1 billion to India for health System Preparedness Project.
3. Asian Development Bank offered aid of $20 billion to its member developing countries. And so on…
Apart from the organizations, countries are also coordinating regionally too , to win over the bout of humanity cooperatively. For Example the SAARC nations , in which through video conferencing PM Modi unveiled the COVID emergency fund for SAARC nations that is open for voluntary contribution of its member countries ,India made a contribution of $10 million and the total collection made $18.5 million.
At this critical point of time every country is struggling to beat the virus. Besides money spend by government and economic loss government is extending the lockdown until world will reach to safe zone. Indigenous development, government cooperation and cooperation among countries is more likely will make the situation favorable. Taking illustration:-
1. Indian Navy developed Air Evacuation Pod for safely transfer patients from remote areas.
2. Railway Coach Factory, Kapurthala (India) have developed a Ventilator that cost 0.1% of the ventilators that are imported from other countries.
3. India supplied HCQ (an anti-malaria drug) to USA and 13 European countries.
4. Indian even after the skirmishes supplied masks, medicines etc. to China, which China responded gratefully.
Such perseverance and cooperation can take the world out of this severe situation.