Since the outbreak of the deadly disease, COVID-19 has had a significant impact on both world economic and financial markets, in addition to becoming a global pandemic and public health disaster. The disease mitigation measures that have been imposed in many nations have resulted in significant income reductions, increased unemployment, and disruptions in the transportation, service, and industrial industries, to name a few. Governments throughout the world underestimated the hazards of rapid COVID-19 spread and have reacted in a reactionary manner to the situation. Because disease outbreaks are unlikely to go away anytime soon, swift international action is required to save lives while maintaining economic growth.
Covid-19 and the Economy
The World Health Organization (WHO) designated COVID-19 a pandemic on March 11, 2020, claiming approximately 3 million illnesses and 207,973 deaths in 213 countries and territories. Not only has the disease become a public health concern, but it has also had a global economic impact. Reduced productivity, mortality, business closures, trade disruptions, and the elimination of the tourism industry have all had serious economic consequences worldwide. COVID-19 may serve as a “wake-up” call for world leaders to increase collaboration on epidemic preparedness and provide the necessary funding for global collective action.
Although there is sufficient knowledge on the predicted economic and health implications of infectious disease outbreaks, the world has failed to invest adequately in preventative and preparedness measures to reduce the likelihood of big epidemics.
Infectious disease outbreaks and epidemics have become global threats as a result of globalization, urbanization, and environmental change, necessitating a coordinated response. Despite the fact that the majority of affluent countries, namely those in Europe and North America, have robust real-time surveillance and health systems in place to combat infectious disease spread, increases in public health capacity in low-income and high-risk countries—
Human and animal surveillance, workforce readiness, and laboratory resource improvement are all areas that need to be supported with national resources reinforced by international donor funds. Building and financing technological platforms to accelerate research and development responses to emerging viruses with epidemic potential has been recommended by governments, non-governmental organizations, and commercial firms on a global scale.
Such collaboration is crucial in the case of COVID-19, especially for the development and production of a vaccine. The Coalition for Epidemic Preparedness Innovations (CEPI), a global partnership launched in 2017, has been tracking global efforts in COVID-19 vaccine development activity and is advocating for strong international cooperation to ensure that, once developed, vaccines are manufactured in sufficient quantities and that all nations, regardless of their ability to pay, have equitable access to vaccines. Furthermore, in order to control the outbreak more efficiently, afflicted nations may benefit from exchanging technology breakthroughs in contact tracing, such as health Quick Response (QR) codes. However, there are also significant privacy considerations to consider (6). In the instance of COVID-19, the global response and adoption of preventive measures to stem the disease’s transmission came too late, after COVID-19 had already spread to other regions via international travel. Figure 1A depicts the dynamics of confirmed COVID-19 cases, demonstrating that significant European countries (e.g., Italy, Germany, and the United Kingdom) and the United States have already exceeded China, the epidemic’s source, in terms of confirmed COVID-19 cases.
COVID-19 has had significant economic effects for the countries affected, in addition to the significant burden on healthcare systems. The COVID-19 pandemic has had a direct impact on income due to early mortality, workplace absenteeism, and productivity losses, as well as a negative supply shock, with manufacturing activity stagnating due to worldwide supply chain disruptions and facility closures. In China, for example, the output index fell by more than 54% in February compared to the previous month. Consumer behavior changed as a result of the epidemic’s impact on productive economic activities, as well as the fear and panic that accompanied it. This was mostly due to the epidemic’s dread and terror, as well as diminished income and household finances. The tourist, hotel, and transportation industries have all suffered as a result of reduced travel. According to the International Air Transport Association, airlines might lose up to $314 billion in income from passenger carrying alone. The Restaurants and bars, travel and transportation, entertainment, and sensitive manufacturing in the United States have been the hardest hit by the COVID-19 quarantine regulations. For the week ending April 11, 2020, the advance seasonally adjusted insured unemployment rate in the United States reached a new high of 11%.
The economic impact of the COVID-19 pandemic will be heterogeneous throughout the country’s income distribution, in addition to noticeable health inequities, especially in nations lacking universal healthcare coverage. Office workers, for example, are more likely to switch to flexible working arrangements during the restrictions, whereas many industrial, tourism, retail, and transportation workers will see a significant reduction in work as a result of community restrictions and low demand for their goods and services.
The COVID-19 spread has had a big impact on the financial markets around the world. The world financial and energy markets drastically decreased as the number of cases began to rise globally, primarily through the United States, Italy, Spain, Germany, France, Iran, and South Korea. Leading U.S. and European stock market indices (the S&P 500, FTSE 100, CAC 40, and DAX) have lost a quarter of their value since the start of the year, seeing oil prices went down more than 65 percent as of April 24, 2020.
The volatility and price swings of the stock market on a daily basis are important indications of consumer and company confidence in the economy. The daily number of COVID-19 cases and various stock indices had significant negative correlations (Figure 2). The correlation varies between 0.34 to 0.80.
Larger economic issues are linked to existing and projected future oil demand, resulting in price swings as a result of diminished economic activity caused by the COVID-19 pandemic. Anticipated oversupply also resulted in significant price decreases. Many oil-dependent economies may shrink as a result of less trade and investment if oil prices remain lower than predicted. Shocks to the labor market will be severe, especially in countries that rely on migration.
Migrant workers contribute significantly to global labor markets, addressing inequalities in both high- and low-skilled occupations. As governments endeavor to stem the spread of COVID-19, international travel restrictions and quarantine are expected to be in place for the foreseeable future, migration flows will be restricted, hampering global economic growth and development.
As the virus continues to disrupt economic activity and have a negative impact on manufacturing and service industries, particularly in developed countries, we expect financial markets to remain turbulent. It’s still uncertain if this crisis will have long-term structural consequences for the global economy or will just have financial and economic consequences in the short term. In either event, infectious diseases like COVID-19 have the potential to cause significant economic and financial losses to regional and worldwide economies. Because of strong transportation connectivity, globalization, and economic interdependence, containing the virus and mitigating the risk of importation has been extraordinarily difficult and costly after the disease has spread to numerous regions. This necessitates international cooperation and worldwide investment in vaccine development and distribution, as well as preventive measures like as national and international capacity building in real-time surveillance and the development of contact tracing capabilities. Because novel virus outbreaks are unlikely to go away anytime soon, strong worldwide action is essential not only to save lives but also to safeguard economic growth.