An Analysis Of Covid-19 Disease From an Economic Scale
As you all know the virus effect still lasts at the
moment. It is a global crisis, a global complexity. Undoubtedly, it is vital
for every country to maintain monetary and financial stability during the
outbreak. Yet, It is globally expected a slow-down mode since the spread of
Covid-19. The uncertainty that the outbreak has caused is associated with downside
effects. In addition to economic stability, demand and supply-side is also
being affected. We are observing supply shocks for some goods and a decrease in
aggregate demand which is a main component of growth, in particular for some
countries.
Economic uncertainty is a major concern at the moment.
As we see in the stock markets, there is a sharp decrease in this component.
Countries where stock markets play
a major role such as the United States, the Euro area, and Japan, all
fell and witnessed significant volatility (Adrian, 2020). As a result, an increase in uncertainty, credit spreads have widened broadly across markets as
investors are reallocating from relatively risky to safer assets (Adrian,
2020). This situation points out that economic expectations are already negative
and unclear for the next periods. As a result, we expect an economic slow-down,
maybe a recessionary scale due to lower investments and expenditures in general
by both the private sector and household. although health expenditures are
increasing around the world, I personally believe that economic constriction
will still last. Some countries that have vulnerable financial systems
might be affected more, such as Brazil, Turkey, India, South Africa, etc. These
countries might easily get affected by currency rates, foreign direct
investment, and growth (Eğilmez, 2018). Once global financial confidence is not
provided for those vulnerable ones, those countries are more likely to
encounter recession, negative growth or a monetary crisis in future
periods. Therefore, it is inevitable for each country to get hit by Covid-19
outbreak while for some, it is a bigger problem that threatening the financial
structure.
On the other side, we
have seen supply shocks, for some specific goods. For example face masks, disinfection
products, storable foods and toilet papers, etc. Supply shocks constrain output and it can disrupt the supply chain. When demand for
certain goods grows, that causes supply shock and it can even cause a shortage
if the responsible situation lasts longer. Obviously, the longer the crisis lasts,
the bigger difficulties will emerge.
In addition, we are
observing a decrease in aggregate demand in so many sectors around the world.
That creates concern GDP (Gross Domestic Product) to fall. Since GDP is
calculated as sum up 5 component including aggregate expenditures (G+C+I+E-M).
In addition, we are
observing a decrease in aggregate demand in so many sectors around the world.
That creates concern GDP (Gross Domestic Product) to fall. Since GDP is
calculated as sum up 5 components including aggregate expenditures GDP=(G+C+I+E-M).
Many shops, shopping malls, stores, restaurants,
schools are now closed. Concerts,
theatres, and collective activities are all canceled or postponed. Only
pharmacies, hospitals and markets are open for survival needs and emergencies.
That means no expenditure. In terms of buying Services, the situation is not
different. Flights have been stopped. Tourism is blocked out. No expenditures on
goods and Services. So obviously in our GDP equation, C (Consumption) will be minus. And above I (Investments) mentioned how investment falls as risk and uncertainty remain. Therefore, İ is minus too. I personally think that G (Government spendings) might not be that negative because many governments offer fiscal policies in order to provide economic dynamism and security. So let's keep G stable in the equation. We will see better in future times how Export-Import balance will be affected but I expect a downward slopping scale. That is because, for example, many countries have stopped intense trade and import from China when the disease first emerged there. The same is true for the tourism sector if we consider it as imports of services, to be specific countries such as İtaly, France, Turkey and the huge part of Asia.
In conclusion, as we have been tough days globally, there is an economic face of the situation. We expect economic contradiction and a recessional graph. Both for the global GDP side and for countries specifically. Regarding all these, it is necessary to get ready for approaching financial problems both for the future and present. It is true that Covid-19 is a pandemia and it affects the whole part of the world. Yet not equally. As I mentioned above, some countries are more likely to suffer from financial pressures for now and after. Therefore it is vital to take precautions and implement sustainable policies.
REFERENCES:
Adrian, T. (20120, Mart 11). imfblog.com. IMF
Blog:
https://blogs.imf.org/2020/03/11/monetary-and-financial-stability-during-the-coronavirus-outbreak/ retrieved from.
Mühleisen, M. (2020,
Mart 20). Mitigating Economic Fallout of Coronavirus. (B. Edwards, Reporter)
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