On 31st Dec 2019, the government of Wuhan, China, confirmed a dozen cases of severe pneumonia. Researchers in China later identified Covid-19 or coronavirus as a new virus that has infected thousands of people in Asia. As recorded by Worldometer:

• In the past two months, the virus has spread to 109 countries
• Infecting more than 116,711 people across the world
• The death toll has reached 4,095 including 3,136 deaths in China only

The World Health Organization (WHO) declared Covid-19 or Coronavirus “a global health emergency.” The virus has not only affected humans but has adversely impacted the world economy and businesses with its uncontrollable outbreak. Its spread to Europe and the Middle East has started a fear of global pandemic. To which global financial markets are reacting strongly, and business leaders are questioning the growth and recovery of the world economy.

What Coronavirus Outbreak Could Mean to the Global Economy

With the start of the year 2020, the trade war with the United States left the Chinese economy to expand at a low pace in 30 years. In addition to this, it is estimated that nearly 4 million people lost their jobs in 2019. As if this was not enough for China to manage, the outbreak of coronavirus put a brake on the economy.

According to Standard Chartered, due to the lockdown in China, the virus could affect 42 percent of the economy. The banking industry may face non-performing loans of $1.1 trillion as the companies fail to make payments.

The outbreak is not only impacting China, but it is also crippling the world economy.

Let’s shed a light on the sector or businesses that are facing economic crisis globally.

Stock Markets

Global Shares take a hit

After the 2008 financial crisis, the world stock market started to experience a severe impact in February 2020. It was estimated that the impact would be limited to companies that have a direct and indirect connection with China.

Now, the virus has reached 109 countries, investors are worried about its impact on buying and selling shares. Investors are nervous; therefore, they are selling into an overvalued market to save profits. The US central bank has decreased interest rates. In order to make the borrowing cheap and to encourage people to spend in the share market. But due to the outbreak of the coronavirus, many companies have stopped their operations.

Global Manufacturing

China is famously known as “the factory of the world.” From 15 to 20 years, China has single-handedly managed the supply chain of international companies. Due to the coronavirus, this has been interrupted, and many global companies have shut down their operations.

For instance, Starbucks closed all its stores in the region due to the outbreak. Apple and Honda also closed their manufacturing unit in February.

In addition to this, more than 51,000 global companies have at least one supplier in the region affected by the pandemic.

Let’s not forget the tension between the US and China caused by the global trade war, and the manufacturing sector is already at a loss. We have to wait and see how coronavirus would impact the global supply chain in the coming days.

Oil and Gas Market

The outbreak of the coronavirus has impacted the oil market to hit the deepest level in oil production cuts. Organization of the Petroleum Exporting Countries (OPEC) are also having disagreements that have caused the prices to go more down.

Saudi Arabia ended up lowering the oil prices that fumed a price war causing U.S. crude oil prices to plunge by 25%. Since 2016, for the first time, U.S. crude oil barrel price went below $30.

According to the American Automobile Association, in the second week of March, the average national gas price has reached to $2.38 per gallon. This is the third week in the United States, where the gasoline stocks decreased, and demand has increased.

The oil price war has raised major concerns in the United States energy industry, and how they will manage the decreasing oil prices globally.

Travel and Tourism

The lockdown has also impacted the Chinese airlines as their planes are forced to stay on the grounds. Nearly $12.8 billion losses may be faced by the Chinese airlines, and the global airline industry is expected to lose $29 billion (IATA).

There has been a lot of trip cancelation, as China and Italy are facing serious lockdowns, and millions of people are quarantined. Entry in Iran has also banned due to the increased number of people getting infected.

Education

According to UNESCO, over 290.5 million students have been affected due to the virus outbreak in more than 22 countries.

• Italy- has been recorded as the most affected region in Europe, with 200 deaths. Therefore, they have shut down schools till 15^th
• Spain- The government of Spain, has closed education centers from nursery schools to universities in Madrid.
• China has been in lockdown for more than two months; millions of students are home bound and relying on online learning

Coronavirus – an opportunity?

When there are losers, there are winners too. Coronavirus has shaken the whole world, and people are living in a state of fear. On the other hand, some people are also benefiting from this novel outbreak.

• Prices of a mask, hand sanitizers, hand-washed, etc. have been increased in no time boosting sales for health sector and pharmaceutical sector. Reckitt Benckiser, Getz Pharma, are some names who are on the winning side.
• Due to the lockdown, people are turning towards online shopping, which has increased the sales for e-commerce sectors such as Amazon and Ali Baba.
• Some business events have been shifted from real offline events to online, like Seedstars summit in Switzerland.
• Walmart sales were also increased as people shopped the necessary items in bulk, leaving the shelves empty.
• Given the closure of schools in certain regions due to health risks, distance education has flourished during this period
• Increase and improvement of domestic production and self-sufficiency.
• While the reduction of economic activities is harmful for economic growth, it is beneficial for the environment, we can observe a significant reducing of pollution and carbon emissions.

Coronavirus has impacted the world in the worst way possible, and as the numbers of the virus victims are increasing, the world economy will face more implications.

Following are some key points to keep in mind:

• Now is not the time for individual investors to take risk with the money, wait till the market settles. However, if you want to rebalance your portfolio by buying stocks to reallocate resources, the time is feasible.
• Keep your travel plans on hold, especially to the affected regions.
• Focus on post-crisis management in order to deal with the aftermath.

©Swiss Arab Entrepreneurs Platform

Information sources: Forbes, Al Jazeera, BBC, abc News.