Since it has become official by the World Health Organization: Coronavirus is the first pandemic in our modern era of global power rivalry, it has become evident that it will have an impact on not only global businesses but also on international politics.
The first consequence, and maybe the easiest of all to calculate, will be the blow to China as well as other economies and markets. The influence would be all the bigger as it corresponds with what has already been a weakening Chinese industry.
This comes at a time when businesses in the USA and other countries have already moved supply chains from China to other locations due to new regulations and trade disputes. So, of course, there are pros and cons to this, what that we are about to find out
Pros of the effects of Coronavirus on economy:
Payroll tax holidays:
Since the inception of the global work from home phenomenon, companies in some countries have been providing payroll holidays.
In addition to the high expense — adding several hundred billion dollars to the federal debt — a suspension of payroll, or social security, tax is not seen as being especially well-targeted or fast-moving enough to turn things around. But payroll tax holiday will amount to an additional $60 pay every two weeks for an employee earning $25,000 a year.
Extension of the tax deadline:
Some analysts have called it a “major stimulus” pouring billions into the economy. During this virus outbreak the tax deferment will offer substantial relief to individuals owing taxes.
And for both the working public and the government as a whole, it’s a slight but double edged gain.
Expansion of the unemployed benefits:
Unions and social advocates encouraged legislators to implement the “umbrella work” incentives, enabling full-time employees to shift to part-time position while being rewarded for decreased hours through the system.
Economists argue that increasing the length and quantity of unemployment compensation provided would also help protect jobs, enhancing a system that has become a prevalent form of incentive in times of economic difficulty.
Paid sick leaves:
Hence, small-wage workers are one of the most susceptible to the economic effects of the health crisis. Therefore immediate action is needed to offer financial aid to staff that are ill or have to be quarantined.
One proposal is to provide tax credits to companies who have paid leave for impacted workers to offset the additional expenses for businesses.
Small business loans:
Some policymakers had agreed to ask their economic development committees to inject more money into the administration of small businesses so that smaller businesses will be given low-interest loans to support them navigate financial distress.
And small firm surveys indicate that liquidity isn’t a concern for most of companies just already, so this measure may actually be a blessing in disguise if implemented properly.
Cons of the effects of the Coronavirus on the economy:
Global economic shock:
The International Monetary Fund said on 9 April that the Covid 19 pandemic has caused an economic recession that the world had not seen since the Great Depression. This announcement followed the United Nations Conference on Trade and Development declaration which warned of a recession in overall growth to below 2% for the year, potentially scraping $1 trillion out of the valuation of the world financial system.
Predicted downfall of the Chinese economy:
China comes second in the list of large economies and top trading country, so economic implications from the initial COVID-19 epicenter would be crucial to monitoring. Economists have said that the eruption possibly cut in half China’s economic development during the initial quarter of the year relative to the last three months.
Because of the impact of the outbreak on economies around the world, China’s economy is likely to be further affected by declining global demand for its goods.
Negative impact of employment:
According to the US Department of Labor, over 6.6 million Americans filed new applications for unemployment insurance in the week end, raising the number of Americans that lost their occupations in just 3 weeks to nearly 16 million. Spain’s data indicates that nearly ninety thousand people have faced the same since its shutdown began in middle of March.
The authentic unemployment rate has risen to 3.5 million – the highest amount from April 2017. Furthermore, according to the United Nations Economic Commission for Africa, Bloomberg estimates that about half of employment in Africa is now at stake as a consequence of the epidemic.
Impact on air travel:
The International Air Transport Association estimated that the Coronavirus epidemic could cost airlines a loss of revenue of 113 billion dollars as lesser people travel. Early on, economic damage from the outbreak affected the transport and tourism industries.
In addition to impacting on airlines, the United Nations International Civil Aviation Organization forecasts that Japan could end up losing 1.29 billion dollars in tourism revenue in the first quarter due to the drop in Chinese commuters, while Thailand may lose 1.15 billion dollars.
Disruption of global commerce:
The early scarcity of Chinese goods and parts impacted businesses across the world, as plants postponed opening after the Chinese New Year and employees remained home in order to help mitigate the virus spread. Apple’s Chinese production affiliate, Foxconn, faced delays in production. Some car manufacturers, including Hyundai and Nissan, briefly shut down industries beyond China because they were unable to procure parts. All but the most vital mills had been closed by countries like Italy, by March.
Apart from this, the entire world’s famous (and vital for the economy) trade fairs, sporting and cultural activities were postponed or cancelled. The pharmaceutical companies, which since February has been battling instability of global supply, has expressed concerns of medication scarcity. These are obvious signs of a total downfall of global commerce as we know it, and it is even being said that it will cost the world a lot to deal with this even after this pandemic is dealt with.
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