Impact of Coronavirus on global market
The blow that the COVID-19 is dealing to the world economy is general, but it’s harder for certain sectors: for the moment, those that are most affected are those related to tourism. In recent days, European and North American airlines have already asked their governments for urgent help to avoid bankruptcy. The gastronomic sector - boosted in a significant proportion by tourism - is also suffering the consequences, after the authorities of various cities in the world ordered the closure of bars and restaurants.
It’s not a credit crisis or a banking crisis. Today's crisis is a bit of all this. Unlike other crises, the current one affects all the G7 countries (Germany, Canada, the United States, France, Italy, Japan and the United Kingdom) and China at the same time. Although the outbreak started in the Asian giant, in a few days it spread throughout the world and, in fact, the epicenter has moved to Europe, especially Italy and Spain.
Against this background, three types of economic blows can already be identified. In the first place, the advance of the virus directly affects production: the more than 230,000 infected are isolated and in much of the world the authorities either decreed a total quarantine or urged citizens to remain in their homes. This, in turn, impacts spending. On the one hand, the reduced circulation on the streets inevitably causes less consumption; On the other hand, many workers stop charging if they cannot go to their jobs.
Secondly, we must emphasize the effects of the different containment measures implemented to stop the spread of the virus, such as the closure of factories and offices, travel bans, and quarantines, among other examples.
The third point is related to the fact that the crisis caused by COVID-19 has consumers and companies from all over the world crouched in a way of waiting and seeing. This is reflected, for example, in the massive drop in travel and hotel stays.
The main problem in the current situation is that the economy continues to function when money continues to flow through the circuit: Generally speaking, an interruption of the flow anywhere causes a slowdown everywhere.
"The basic principle should be keeping the lights on," said Richard Baldwin, professor of international economics at the Graduate Institute of International and Development Studies in Geneva and founder of the VoxEU.org portal. who also considered that the key is to reduce "the accumulation of economic scar tissue”, in other words, "reducing the number of unnecessary personal and corporate bankruptcies."