Compared to related occurrences in the past, for instance the SARS outbreak in 2003, the global economy has become significantly more integrated, and China plays a far superior role in global output, trade, travel and commodity markets. Nevertheless, the jolt to the global economy from Covid-19 has been more rapid and more severe than the 2008 global financial crisis.
The world has been changed by this ongoing pandemic. It has impacted the whole world much more than the terrorist attacks on the Twin Towers on September 11, 2001. In the current scenario, the world is not at all afraid of any terrorist outfits, while the havoc by the coronavirus has threatened the globe with terrible consequences.
People around the world are locked inside their houses and fearing for their lives if they don’t restrict their movements. Even a superpower like the US is struggling to fight the hidden enemy of the Covid-19 outbreak in every state. Despite being a superpower, they were unable to assess the damage it could bring for the people, who are now afraid of an unseen and unfelt enemy that dodges all barriers, respects no borders, has regard for no age, gender or religion.
It is no surprise that the aviation and hotel industry will suffer the maximum from this Covid-19 pandemic. According to the Air Transport Association (IATA), it anticipates a likely hit to global aviation revenues of up to $113bn this year. That is one-fifth of last year’s overall revenues and four times higher than IATA estimated in February 2020, when the coronavirus was still believed to be a Chinese problem rather than a global one.
Governments are contributing some assistance for their operational survival. Many carriers are also scaling back capital spending by deferring the procurement of new aircraft. Not every airline will endure this pandemic. Thousands of people will lose their jobs in view of this pandemic and subsequent outbreaks in other economies are having comparable effects.
Similarly, the EU's powerful yet largest economy Germany was already under dark clouds in its automobile industry since last year and the ongoing Covid-19 pandemic has added more troubles to the already troubled industry. According to Bloomberg and Financial Times in September 2019, “Amid trade wars and plunging China sales, the number of cars rolling off Germany's production lines has dropped by 12 percent this year and exports by 14 percent”.
The German auto industry is in the midst of a far-reaching upheaval,” said Volkswagen chief executive Herbert Diess, whose company is seeking to reinvent itself as a world leader in battery-powered cars. According to him, it is estimated that the German car industry, which directly employs 830,000 people and supports a further 2m in the wider economy, will be forced to plough some 40 billion euros into battery-powered technologies over the next three years.
Massive employees’ layoff was already planned in the automobile industry during last year, and now the current scenario of Covid-19 will further strengthen and broaden the layoffs sphere, even more severely.
The battle against the hidden enemy we call Covid-19 is full-on warfare. According to some leaders, the world is in a health war and China seems to have won the first battle.
The most badly hit country is Italy, which has predominantly strong economic ties to China. Currently, northern Italy is the new Wuhan. If the virus stays longer in the major strong economy countries then global growth and trade will be much worse and more inescapable as compared to what is predicted.
From Shanghai to Iran to Germany to Italy to Spain and parts of the US, entire cities and countries are making radical modifications to decelerate the blowout of the coronavirus but the outcome of these drastic changes will be visible after a week or two.
If these strong economies get a success rate within 15 days of quarantine, they will somehow face near-term challenges from this pandemic, underlining the need for policy actions to strengthen healthcare systems, innovate medical infrastructure, boost confidence and demand, and limit adversative supply effects. But one thing I believe we have all learned from this pandemic: and that is to have a robust medical infrastructure, more innovation in the medical industry and readjusting of the defence budget with the health and educational budgets rather than producing atom bombs and nuclear arsenals for peace.
The post-Covid-19 world depends on the range of drivers but it is creating a dynamic situation around the globe. Currently, public life is largely at rest, many doors are closed, houses are tightly full, and there is a yawning emptiness everywhere. What is still relevant today can already be outdated tomorrow. Nobody knows what will come and how long the new virus and all its consequences will have a grip on society.
Recession risk is real and eventually; we will be experiencing a global financial meltdown since major economies have recorded trillion of dollars losses in the last couple of weeks. We all will witness global unemployment depression, we all will observe slow or no markets growth and vulnerabilities of major powerful economies, we all will see that people will go bankrupt and some countries will not be able to absorb the post-pandemic financial shocks.
The writer is a CSCP in an international organization.
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