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Impact Of Coronavirus On The Economy
Firms with lower revenues will struggle with repayments and cash flows and those who earn the daily wage earners will face the same problem too with increased intensity.
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The novel Coronavirus that emerged in Wuhan in December’19 has spread like wildfire across the globe. As per the WHO reports, more than 1,80,000 people have been confirmed positive with the virus across 150 countries & territories. The coronavirus pandemic has left businesses around the world counting costs. The following shows how the Coronavirus is impacting the economy:
A recession might become inevitable: There is no scope left now that the recession won’t hit. The global economy is suffering from a supply shock. People are not at work because of being quarantined or not keeping up well. This will lead to a fall in the GDP growth along with increasing prices, leading to Stagflation. An Indian official stated that growth in the first two- quarters of the next fiscal could be as low as 4-4.5%
Affecting the service sectors: According to reports, as governments across the world have imposed assembly and activity curbs, sectors such as tourism, aviation, hospitality are having a very tough time. In India, it’s said that if the shutdown on travel and malls continues for a month or more, a zero-revenue situation will impact the ability to service loans.
Lockdowns & Struggling Repayments: As mitigation steps, the government, as well as firms, are shutting down partially to avoid the spread of the virus. This will help in preventing the virus to spread any further but will also hit demand. Firms with lower revenues will struggle with repayments and cash flows and those who earn the daily wage earners will face the same problem too with increased intensity.
Financial hemorrhage and trade disruptions: Sensex has already crashed below 29,000 for the first time in three years. If the rupee continues to weaken, the firms that are dependent on foreign loans will suffer. Those who were dependent on foreign supplies have already been hit as the imports declined sharply last month. The exporters need immediate fiscal relief and credit flow to keep their workforce and machinery in running operations.
Impact on Tech industries: As per the TrendForce reports, coronavirus has already disrupted the tech industry. It is expected that the production of smartphones will decline by 12% year-on-year this quarter. Smartwatches, laptops and smart speakers are expected to see the biggest decline in previous forecasts.
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