Impact of COVID-19 on world’s economy
They say the only certainty of life is uncertainty. We have been reading this quote since long, but might never have understood its deeper meaning. Today, when COVID-19 has hit our lives hard, we have realized that some things in life are simply uncontrollable. Our wish list for 2020, that might have included travelling to a dream destination, owning a top-class car or partying hard with our loved ones, has gone into dump. COVID-19 has confined millions of citizens to their homes, ceasing or hampering almost all the economic activities. Within months of lockdown in different countries, the global economy has shrunk drastically.
According to research, the global economy is expected to shrink by over 3% in 2020. The same has been noted as the steepest slowdown since the Great Depression of the 1930s. Not just the developing countries, but even developed countries such as France, UK, Germany, Spain, Japan and US have been hit hard. Let’s try to understand the impact of the novel coronavirus on world’s economy:
- Temporary Supply Chain Disruptions: Economies such as China have always played a key role in global supply chains. They are the widest producers of electronics, computers, pharmaceuticals, and transport equipment to name a few products. However, due to lockdowns, no more imports are being done from there. The supply chains of several essential goods and services have got disturbed on a global level. With the sudden outbreak of COVID-19 and no time handy for prior preparations, industries have not been able to manage alternative suppliers for obtaining specialized parts. A prolonged delay in restoring the production of high-demand goods has resulted into heavy losses for several big manufacturing players.
- Jump in food prices: COVID has disrupted grain stockpiles globally. Lockdowns have contributed to shortages of fertilizers, animal feed and pesticides. These developments have increased the costs of farming and raised the possibilities of bad harvests. Shortage of labor is also another factor contributing to this trend. It is not just a problem of India; even countries such US are currently facing a huge labor shortage. Cross-border travel restrictions have disrupted the seasonal cycle of migrant farm workers. In effect, the pandemic has led to a rise in social anxiety and deprivation, which has also led to food price hikes.
- Tour, travel, and transportation industries going through rough patch: In the fear of getting exposed to the virus, many people cancelled their travel plans, including personal, professional, and holidaying. Many governments too imposed restrictions on pan-country and international travel. Several people cancelled their bookings to attend international concerts, events, sports matches; in fact, most of such events stood cancelled in the first place or shifted to web mode. Not just airways, railways or buses, but even smaller, local modes of transportation – rickshaws, autos and taxis also suffered badly. The COVID-19 spread has also impacted retail and e-commerce supply chains. Some essential and high-value product deliveries continue to get delayed, while others have become expensive.
- Major boost to medical equipment industry: With the outbreak of the pandemic, industries worldwide have suffered losses, however, as a silver lining, medical equipment companies have experienced benefits. The demand for ventilators, face masks, hospital beds, safety gears, testing kits and other medical equipment has risen in a steadfast manner. However, amidst this demand, numerous countries have banned the export of medical equipment to cater to their own interests first. This trend has affected the global supply chain of medical equipment. However, the demand has led to rise in domestic productions. Healthcare entrepreneurs have expedited the production and delivery of medical gear and equipment.
- High sales opportunity for organic products: It’s a fact that the market of organic products has seen an upward trajectory at several places. Instead of conventional products, people are preferring organic products to boost immunity. The demand of these products is also increasing in personal and cosmetic care segments. A lot many niche oils such as tea tree oil, clove oil etc. are gaining demand as they have antibacterial and antiviral properties. Eucalyptus oil is being actively used as it helps stop the transmission of many-an-infectious-diseases. It is being used in various balms, inhalers, ointments, and diffusers. Aloe-vera is also gaining huge demand, as it helps make hand sanitizers at homes.
- Muted demand of industrial metals: Metal makers are facing muted demand which has led to a considerable suppression in the prices of precious metals. Aluminum, Steel, Zinc, Copper manufacturing companies are facing down market. Various Indian steel makers are also looking forward to different ways to increase capacity utilization. Tata Steel has closed units located in Maharashtra and Uttar Pradesh. However, the main sites at Jamshedpur, Angul and Kalinganagar, are still in operation as they are process plants and have the permission from local authorities.
- Investment into Digital Marketing and Operations: The B2B sector largely depends upon conferences, trade shows and exhibitions for business, but due to spread of COVID-19, most such gatherings stand cancelled. Now, more and more companies are looking to shift towards digital, cloud and remote modes of operations and related marketing. This trend would help businesses continue advertising and delivering products and services to their target audience, and without violating the norms of social distancing. Even traditional companies now want to opt for social media marketing, content marketing, Google Ad Words, email marketing etc. In fact, they are trying to organize exhibitions, tradeshows, and webinars online through various conferencing apps.
Over 132 countries have been severely hit by the pandemic. It is concluded that the global economy is likely to contract by over 3% in 2020. And, the economy would certainly take time before it returns to pre-pandemic levels. Soon, vaccination and more effective medication are likely to come out, and could bring much relaxation as far as lockdown-like situations are concerned. Time will also help reduce the anxiety prevalent among the public, and soon, they would start coming out to shop, buying things just like before and travelling like before. Till then, stay safe and be positive.