Coronavirus impacts on economy explained well in 2021

 

   

The spread of the coronavirus has pushed the pause button on one of the world's biggest economic powerhouses we're coming on the air at this hour with breaking news there. Wall Street ending one of the worst weeks of trading since the financial crisis in 2008. 

We are starting to get to that point where those supply chains are gonna have massive disruptions when the world was first hit with SARS almost 20 years ago. It caused an economic blip mostly for China and its neighboring countries but at the time China's gross domestic product was only four percent of the global total and now stands at 16 percent making China the second-largest economy behind the USA. 

One major driver behind China's economic rise was its massive network of factories which churn out everything from t-shirts to mobile phones for consumers all over the world. Today China makes up a third of world manufacturing and is the world's largest exporter. Decades of globalization have created supply chains so deeply interconnected that when there are issues in China's economy it's felt across the globe. We are in a situation where China shut down various factories and other places of work. China is not producing various bits that may be vital input into the production in other economies so that is causing a ripple through effects around global buy chains in an effort to halt the spread of coronavirus.

Wuhan China the epicenter of the virus was sealed off in China. Mandated factory shutdowns across most of its provinces. The high-end motors had to suspend production in South Korea in early February after not receiving parts it usually gets from China. Apple felt the crunch as well while the company designs and sells the iPhone it doesn't manufacture its components. It relies on a complex web of facilities throughout the world to source its parts with a heavy reliance on China due to the coronavirus impact. Apple has warned that sales are expected to fall short of targets and fewer iPhones will be available for sale. The hysteria around coronavirus has made investors nervous. The last week of February saw the US stock market suffer its worst week since the global financial crisis of 2008. 

The US and the Canadian central banks have slashed interest rates by half a percentage point in response to mounting economic concerns. The Organisation for Economic Cooperation and Development said global growth could be cut in half to 1.5 percent in 2020 if the virus continues to spread but as of now, the spread of the coronavirus is too unpredictable. Economists say for a recession to happen in the future if the coronavirus would have to reach pandemic levels. Whether or not that happens is still unknown what we are wrestling with uncertainty. This will define our projections which at this point lead us to state that global growth in 2021 will dip below its last year's levels but how far it will fall and how long the impact would be is still difficult to predict. 

So how the coronavirus will truly impact the world economy will heavily depend not only on its severity or duration but also on whether consumers start to change their spending behaviors based on that fear.