The novel virus CODVID-19 has affected the global economy in unprecedented ways. Ever since China alerted the World Health Organization of the coronavirus in the province of Wuhan, countries have showed their ill-preparedness to deal with such a pandemic leading to a rise in the number of cases. However, the fear over coronavirus has less to do with health effects and more to do with global economic implications that demands countries around the world to work together to manage the virus.
Chinese Economy Flatlining
After recovering from the SARS breakout in 2003, China became indispensable to global businesses. From making around 4% of the GDP 17 years ago, China’s economy has risen to 16% through exporting supplies and other goods to the rest of the world. But when the coronavirus outbreak happened, the economy took a massive hit ultimately making a dent in the global economy. Provinces responsible for about 69% of China’s GDP were closed an extra week after the Lunar New Year holiday ultimately trapping ships at port and shutting down household spending not just in China, but all over the world.
As the world’s second largest economy, China’s struggle to manage the virus with city-wide shutdowns, travel bans, and vaccination research has stalled production of manufactured goods that other countries need. The rise of globalization has reached a level where most countries are intricately interconnected in supply and demand. With most globally traded goods, China is the start of the supply chain and any interruption to production results in a supply shock. This scarcity means that countries that depend on China also will face a decline in their GDP.
Right now, the world’s debt is three times more than the global economy. Global debt is still at a manageable level, but it’s hard to predict how long it will take to improve or if it’ll fall even more. This is because of people’s reaction to the virus in their actions rather than their health.
Fear Shrinks the Economy
Since the outbreak, panic has spread around the world with people hoarding survival supplies that resulted in a toilet paper shortage in Australia. In the largest economy, Americans fear of the coronavirus spreading has limited face to face interactions in the services industry such as travel, large events, restaurants, gyms, and even health services.
The reaction to the pandemic can be likened to a “snowmaggedon” that also halts face-to-face interactions due to the weather inconvenience. Unlike snow, which melts and eliminates the problem, the spread of a virus that has yet to find a successful vaccine isn’t as easy to get over. More people who avoid health services will be more likely to see a decline in their health, making them more susceptible to the disease causing them fear.
A Global Solution
Though the number of CODVID-19 cases rose at an alarming rate, China has used drastic measures to contain it in order for a bounce back in economy. But in a world where nationalization is stronger than cooperation, managing the virus may take much longer.