The world is slowly gearing towards an intense period of isolationÂ
With countries and cities going on lockdown, the world is slowly gearing towards an intense period of isolation. Governments are announcing the cancellation of social gatherings and even religious gatherings in the name of being safe rather than sorry.
Businesses are being forced to protect themselves and their workers by closing their doors and saying yes to remote working.
For some, the increase in the number of remote work scenarios has already provided them with some economic advantage. A video meeting software company, saw its application become the most downloaded app on Apple’s AppStore. The company’s share price has more than doubled over the past month.
Microsoft also recorded a 500% rise in the number of meetings, calls and conferences in China via its platform Microsoft Teams since January 31st.
Things aren’t as rosy for other business. Travel and tourism industries have been affected heavily since the outbreak of the virus. Countries are shutting down airports so as to monitor the rate of infection spreading through its borders. For some major American and European carriers, share prices in the industry have declined as their revenues fall in the midst of travel restrictions.
It does not take much to point out the ways in which COVID-19 is negatively impacting the global economy. According to the UN Conference on Trade and Development, there already exists a “substantial decline in output” in China due to containment measures set up against the virus. The shutdown in Hubei Providence and several areas has heavily affected Chinese production.
As the main supplier of finished products as well as “intermediate” products which are used by countless industries around the world, concerns over declining output levels in China has left several companies fearful that their output and business may soon be affected.
Preliminary data analyzed by the UNCTAD confirms that developing countries that rely on selling raw materials to other countries are likely to be severely affected by global containment measures.
What kind of problem does this create for the global economy in the long-run? Simply put, delays in shipments of products and production schedules will end up creating financial problems for several companies. Investors who have under-priced risk will be exposed by the decline in global equity markets, drying up liquidity in financial markets across the globe.
With a possible global financial crisis looming, the IMF and World Bank group have declared their readiness to assist member countries in addressing economic challenges posed by the pandemic.
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