Corona 2: The economic fallout
With the Coronavirus outbreak, the best countries can do for now is to expect the worst, but hope for the best. OK. Corona has wiped $2.5 trillion from the value of global stocks. This is despite central bank intervention earlier this week.
The world's most powerful central bank, the New York based Federal Reserve, lowered rates days on Tuesday. The markets appeared to rebound. However, markets have continued the downward spiral as Corona continues to spread.
Then Bond Yields, a marker for economic growth and a pointer to recession, have also fallen precipitously. The west is not yet in a recession. However, a recession is expected by pundits and sadly for the Caribbean, the world tourism industry, the Caribbean's ''bread and butter,'' has taken a massive hit.
Airlines are cancelling flights to specific countries - especially in East Asia. Some airlines have already collapsed. The cruise ship business is deeply worried.
Hotel and restaurant bookings are down throughout Europe. Jobs are being lost, and businesses are going to the proverbial wall. World leaders are in denial.
In the USA, Coronavirus was unexpected. The virus has started to spread there. And in both the US and UK economies, the supply-side economy has dis-invested in national healthcare over many years.
For the USA, the middle classes, and those uninsured, a Corona outbreak will bring real hardship, with medical bills running into the thousands and even tens of thousands of dollars.
In a country where half the population lives from paycheck to paycheck, Corona could put many families in dire straits and impact public and consumer confidence.
The great question is how long will this crisis last?
Estimates vary.
The optimists expect the crisis to subside in two months. After that the world economy will begin its lift towards growth, that has temporarily been frozen.
As fear and concern disappear, business and consumer confidence will be enough to return the world economy to growth.
Sceptics like this Old Boy are unsure. No one knows how Corona will pan out. So all assertions based upon speculation, and not based upon hard science are invalid.
The best one can do in the present circumstances is to simply ''batten down the hatches'' and place hygiene at the top of the priorities list, and hope this virus disappears.
Pessimists see a prolonged crisis that will see hundreds of millions of people around the globe infected with a hundred million deaths.
The world economy will plunge into a long recession that could eventually become a depression, as the world economy, with broken supply chains, and whole countries shut down, plunges over the precipice.
This will be a recession without end, unlike 2008 which was man-made.
No one knows how this virus will behave. Already there are reports of a second strain.
With Corona, the end of the crisis will depend on a vaccine being discovered, and then made swiftly accessible to the global public.
Consequently, and as of March 2020, anyone who states the worst is over, is in delusion.
Connect with Dickson Igwe on Facebook and Twitter
.png)
Follow Us On
3 Responses to “Corona 2: The economic fallout”
However, in regards to Coronavirus, the US has been sending mix messages, not strong leadership. The Executive branch and the medical professionals do not seem to be on the same wavelength, causing the market to rattle and tank, resulting in Federal Reserve Bank having to intervene to try to mitigate the slide. The US Stock Market drop over 2000 points today.
Politics is the animating force that is driving the uncertainty. The US Executive Branch is accusing the media and Democrats of hyping the Coronavirus. The other countries, ie, Italy.......etc are treating the Coronavirus outbreak with serious urgency and importance. The Coronavirus is probably approaching pandemic stage and is a crisis and the US is struggling as to how best to manage it. It is not one of the US finest hour. If the uncertainty and the down playing the seriousness of the virus continues and not recognizing the urgency of the crisis, the market will continue its downward slide. When the US economy catches a cold, many countries, including the VI, catches walking/working pneumonia. Tourism is 1/2 of economic twin pillars with most visitors coming from the US. Consequently, if the Coronavirus causes Americans to stay home, the VI economy and service delivery will probably falter.
Fellow VI residents take the necessary precaution measures to protect yourselves and your families against this virus.