Economic Impact of COVID-19

Human race is a resilient specie with a  strong survival instinct,having gone through many wars, pandemics and disasters.  Following the nature’s rule of survival of the fittest, humans have not only survived in all situations but also ensured lesser space for other living beings eventually causing  many species to extinction.

COVID-19 has provided human beings yet another opportunity  of survival.  Following  Maslow’s theory, in all this panic and chaos, only thing which went short on supply was the basic necessity that is the  food.  People do not seem worried about closure of airports, luxury brands, cars and fine dining.  Prices of non-essentials have plunged while trillions of dollars have just been wiped off global economy. So far, it is  only the basic food commodities that maintains its importance; as it can allow long periods of isolation without starving.  Governments’ main concern today is health care for the sick and food for all.

Outcome of this outbreak is yet not known, neither a cure has been found.  Even the most developed countries are unable to give a timeline whereby their own country can be pulled out from the whirlpool of this mutated virus. Apparently, human’s own immune system is initiating the healing process and doctors are supporting by managing the patient. 

Since the virus  first detection in December 2019, more than 800,000 people have been infected with this virus and the number continues to grow.  Deaths have crossed more than 50,000 and counting is still on. It is still difficult to fathom the extent of morbidity and mortality in in coming days but one thing appears to be more certain that it will take a few months to recover out of this health crisis  However, economic effects of this fiasco will take a much longer time to recover.

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World is already witnessing crash of stock exchanges, intangible money in the stocks have simply been wiped off the books.   Likewise, many businesses addressing luxurious needs have come tumbling down.  Economist are predicting joblessness to touch 25 million figure, just in USA. As COVID-19 is  spreading fast and unleashing its influence to immobilise the smartest living creatures on earth,  estimates given earlier seem to  be obsolete.  Leading airlines of the world are shedding staff to the tune of thousands.  Revenue losses only in this segment are touching US$1 trillion mark.  Some airlines have already announced pay cuts or sent staff on unpaid leave.

When a person´s health and livelihood are the most important factors in one’s day to day life, need of luxurious apparels holds lesser importance .This will eventually lead to lifestyle cuts and reduced consumer preference in spending on these items.  Thus, a recession in apparel industry is eminent,  which is likely to affect countries like India, Bangladesh, Sri Lanka, Pakistan etc., as export orders will reduce and it will become unsustainable for small manufacturing concerns, resulting in reduction in manpower or total closure of the units. Industries supporting apparel industry will have ripple effect.  Many brands have already announced online sale for their new arrivals and put a cap on further orders. Likewise Energy sector will face serious challenges owing to falling oil prices. It will have to take concrete measures to reduce production cost, which may involve review of human resource cost.  

With increasing unemployment and pay cuts, disposable income for extravagances and frills will reduce considerably.  Governments will be more concerned with food security leading to promotion of agricultural produce. Strategic food stock levels will be increased, exports for value addition will reduce.  In overall terms economy of those countries capable to produce their own food will revive earlier than those dependents on others.   Companies involved in production of value-added food and consumer products will take longer, to recover from this economic crisis.  Luxury industry will be the tail ender in the game of revival.  

If this ordeal continues for another 6 months , the world may witness grave consequences; eventualities that we are  not prepared for. A financial crisis occurred in 2008 resulting in fall in oil prices and cities like Dubai became city of empty skyscrapers. To date many high rise, remain without occupants, though not publicly admitted.  The domino effect was halted by pumping money into the system from different corners and lowering interest rates, etc.  It was all because of a single factor of high mortgage risks. This time situation is altogether different, it is not primarily  a financial crisis, yet has brought the world to a standstill, well almost!. It has brought down oil prices all the way down to US$20 per barrel and the journey further downhill will not be a surprise.

In the developing scenario, have nots may develop criminal mob psyche.  Some isolated incidents that have taken place across the globe, indicates that if something is not done soon to provide basics for under privileged, an irreversible chain mob psyche is likely to begin. Economists are forecasting losses, rich are less worried at present due to accumulated wealth, whereas media is creating chaos to save its own jobs, but and but with all capitals.  NO ONE WILL BE SAFE.

Question arises as to what the solution can save millions of jobs and prevent a total damage to wheel of global economy?

Take a break and slow down!

Adopting simpler lifestyle will be the key to ensure minimum unemployment and sustain maximum businesses. A cut in earning must be taken by all individuals and trades to help people survive.   Businesses will have to re-think their pricing and profit strategy. While People will have to re-consider reduction in their monthly incomes.  The world will have to take measures to immediately bring down costs matching a decade ago and so the remunerations.  These steps may not be very lucrative, to start with, but will help avoid anarchy of civil wars and lawlessness.  It may cause discomfort to  the privileged class but will keep the doors open to silver lining. 

This is the time each and everyone should rise above own self and think selflessly.  Otherwise if banks start filing bankruptcies, whatever is accumulated will vanish in few seconds.

A time to re-think!