The reported cases of coronavirus that causes the new diseases COVID -19 first appeared in China at the end of last year, and it has the potential to trigger a worldwide recession. It has spread regrettably building up economic uncertainties as investors are recording containment measures, supply chain disruptions, and spillover from the financial markets. The extent of economic damage depends on how fast the virus gets contained and the steps authorities will take.
The most Vulnerable Sectors
At the sectoral level, the production sector will be among the hard hits. Chinese production has been significantly affected by the shutdown of various provinces, and most countries are experiencing impacts. China’s sources of imports like Korea, Japan, and other Asian countries have been affected by the outbreak and are likely to experience slow economic growth.
It will also affect the supply chain markets, through the manufacturing firms which rely on imported inputs from China and other affected countries. Transportation restrictions and slow down of economic activities will affect the productivity and profitability of most global companies. The tourism and travel-related industries will also face massive losses that they may not be able to recover.
The economic impacts have also spread through the financial markets, and some investors are already recording lower corporate earnings.
Other investors prefer to hold government securities, particularly the US treasuries; thus, there is an excellent possibility of declining equity and corporate bond markets.
The disease has caused consternation across European markets, and the resulting panic knows no border. However, there is still safe investment havens, and it’s upon you to conduct due diligence before making investment decisions.
As a funded trader, you need to diversify your investment portfolio to assist limit your exposure in case the markets become too volatile.’’
Expected Economic Outcomes
Currently, most affected countries have decided to protect themselves through quarantine and other restrictions which will lead to economic downturns.
People are likely to avoid malls, restaurants, job places leaving them with less money to spend, which will subsequently affect the GDP in most countries.
Productivity levels will be low; the health system will be overwhelmed as we wait to see if the spring conditions will slow down the spread. With such terms, global economic growth will fall to recession levels.
Although the spread of the disease is a worldwide concern, businesses with alternative sources of supply will survive the low economic periods and will have a competitive advantage.
The longer the virus will spread, the more the economic fallouts that will increase the debt sustainability concerns, especially for indebted countries. We should all work collectively to prevent and mitigate further outbreaks and to provide the best ways to limit the economic crisis.