The Economic Impacts of Covid-19 Explained

Credit: World Economic Forum

Covid 19 has not only placed global health and billions of people at risk, but has had quite devastating impacts on the economy. The stay at home orders in many countries and total lockdowns have harmed international economic activity, and many are expecting and bracing for large GDP contractions - estimates suggest that GDP for many countries will fall by 2.4%.

The stock markets have dramatically fallen, and oil prices have hit their lowest in history - reaching negative levels. The future is uncertain, and without any foreseeable solutions, countries are perplexed by the economic vs. health dilemma this pandemic has raised. This blog will clarify and explain many of the international economic effects, and explain the maths and reason behind the madness.

Crude Oil Prices and Stock Market Crash

Stock markets are often used as a microcosm of how well the economy is performing - if stock prices rise, this often correlates with good economic performance. The Dow Jones industrial average, a measurement of stock performance, hit its one-day lowest twice in March, the peak of Covid 19, signifying lower than usual economic activity.  

Especially concerning is the effect on oil prices, as this is the main source of income for many OPEC countries. For the first time in history, the price for an oil barrel hit negative prices - suppliers were paying people to take oil barrels away from their hands because there is such a lack of demand for oil. OPEC countries have consequently agreed to slash production by 10% - setting a record - in fears of there been a global deprivation of demand.

Unemployment reaches a new high

Unemployment has reached a global high, especially in the United States, as in the span of a week, upwards of 3 million people applied for unemployment benefits in the country itself. As companies slash production due to lower demand and low business, many workers have been laid off to conserve business revenue. Countries are slowly edging towards unemployment funds being totally dried up, and this sets an unforeseen precedent on global unemployment. 

Small scale businesses struggle

Certain businesses, such as Amazon, have prospered under the lockdown. Yet, a greater majority of smaller, local companies have suffered, due to a lack of demand and continued lockdown measures. Grants and funds provided by countries towards these companies have provided a temporary measure, but place a greater risk of running the country in debt. 

A fall in global economic activity

Globally, the lack of economic activity due to concerns and fears of the virus have impacted both demand and supply sides of the economy - affecting workers and companies. Global economic activity is essential to the prosperity of the country, and have forced many to neglect WHO advised measures (such as lockdowns), in hopes of conserving economic performance.

This raises a prevalent dilemma, where the country must choose between good, consistent economic performance, and conserving the wellbeing and health of civilians.