The story so far: The global death toll due to COVID-19 has crossed the 5,300 mark, with over 1.42 lakh people infected. India, where 88 people have been infected, saw two casualties when a 76-year old man died in Karnataka and a 68-year-old woman died in Delhi this week. A diverse set of industries has been impacted by the spread of the virus. With daily news reports painting a dismal picture of supply chains affected, it is easy to visualise the global economy virtually grinding to a halt.
What does it mean to the global economy?
Analysts fear that the global economy may tip into a recession unless the virus turns out to be seasonal. (A recession sets in when the economy shows two consecutive quarters of contraction.)
The problem with current predictions is no one knows how long the virus will remain potent, how authorities around the world are able to stanch new cases and the resources they pull out to treat old ones. What business hates is uncertainty and uncertainty is the only thing that abounds when it comes to predictions about the vitality, endurance and longevity of the new virus.
Rabobank has been cited in the media as saying that a global recession now is all but certain. It has predicted global GDP growth to be 1.6% for 2020, a figure that was 2.9% the last year, as per IMF estimates.
Also read: What can India do to overcome the global slowdown?
Economists from Nomura have warned that a global recession might be inevitable.
This year, in early March, the Institute for International Finance had said that global economic growth could turn out to be as low as 1%, and this was even before the OPEC club and Russia fell out on production agreements to maintain stable oil prices. Oil prices have had a free fall, sending stock markets into a tizzy. The UN’s United Nations Conference on Trade and Development (UNCTAD), said the virus outbreak could cost the global economy up to $2-trillion this year and that the pandemic could cause a recession in some countries causing global economic growth to clock in below 2.5%.
Why should the economy be affected?
If you engage less with the outer world, and avoid work, education, fitness and entertainment, a lot less economic activity would occur. Businesses face the challenge of disrupted supply of components to make products, or of having to shut some of their factories temporarily, not to mention large swathes of the workforce having to be quarantined.
Also read: COVID-19 | Trade impact for India estimated at $348 million: UN report
Which are the industries impacted?
There is no industry that has experienced the impact. When China, with the disease’s epicentre in Wuhan, was brought to its knees, the Indian pharmaceutical, automobile and mobile phone industries, for example, immediately wobbled. India depends on China for