How did a health crisis translate to an economic crisis? Why did the spread of the Coronavirus bring the global economy to its knees? This has brought many economic researchers, scientists, security agencies, and business managers coming together to debate on the way forward. The virus has created many downturns in the life of individuals and has caused many social activities to be halted.
The outbreak of the covid-19 pandemic all over the world has disturbed political, social, economic, religious and financial structures of the whole world. World’s topmost economies such as the US, China, UK, Germany, France, Italy, Japan and many others are at the Verge of collapse. Besides, stock markets around the world have been pounded and oil prices have fallen off a cliff. In just a week 3.3 million Americans applied for unemployment and a week later another 6.6 million people started searching for jobs.
When it comes to the human cost of the Coronavirus pandemic it is immeasurable, therefore all countries need to work together with cooperation and coordination to protect lives as well as mitigate the economic downturn. For instance, the lockdown has restricted various businesses such as travelling, tourism and others. There has also been speculation that the economic recovery from this fatal disease is only possible by 2021 due to its severe impact on the global economy and the difficulties associated with countries returning to normalcy.
Many nations are going through recession and collapse of their economic structure. Almost 80 Countries have already requested for financial help from the international monetary fund (IMF). For instance, Bloomberg Economics warns, “full-year GDP growth could fall to zero in a worse – case pandemic scenario”. Various sectors and economies are becoming more vulnerable due to the coronavirus pandemic. As a result of depressed activity, both demand and supply have been affected by the virus, hence, Foreign Direct Investment flows could fall between 5-15 percent. Besides, the most affected sectors have become in peril such as tourism and travel related industries, hotels, restaurants, sports events, consumer electronics, financial markets and transportation.
According to Brookings institute, Africa is the world’s last frontier in the fight against extreme poverty where one in three Africans- 422 million people – live below the global poverty line. Consequently, this fact signifies the bigger gap between the have and have not in the continent where the consequences of covid-19 on the economic sectors will push the efforts to reduce the income gap backward and increase the number of people living below the global poverty line.
This is cemented by UNDP, which stated, “the covid-19 crisis threatens to disproportionately hit developing countries – income losses are expected to exceed $220 billion, and nearly half of all jobs in Africa could be lost”.
A world Bank report issued late last year pointed out that “ with increased access to international capital markets, many low and middle income countries shifted away from traditional sources of finance and experienced a sharp rise in external debt, raising new concerns about sustainability”.
If, due to problems caused by the covid-19 crisis, there are widespread defaults among poor countries this would pose serious problems for the global economy. It is therefore imperative that requests for debt forgiveness or rescheduling do not fall on deaf ears.