SARS-CoV-2 virus is exponentially decimating its victims with a tremendous increase in the number of deaths, to 212,265. The multiplicative encroachment of this virus across the globe is not only injecting fear but is also causing a number of economic turbulences. Within China it has spread across over 19 territories. The emerging patterns and spike in the number of hospital arrivals, calls upon the officials to gauge how contagious this virus could be. Echoes of this fear have shaken the Chinese economy. Following the Infosphere issue on gauging the economic impact of the great lockdown and Coronavirus pandemic, this article looks to further analyze the pandemic’s rippling effect.
Government, in response to this health crisis, has to bear heavy losses resulting in slow economic growth. If health and safety can be interpreted as public goods, a possible policy measure may include isolating cases, quarantining and shuffling the population within China . However such a measure would only be possible in a theoretical sense since economic migration will give birth to new problems and hamper organization of the workforce. Inadequacy in implementing effective policies measures has led to a trickle down effect of problems such as -closure of factories, schools, disruption in travel and tourism industry and various correlated problems. Many countries have seen a sharp rise in sectoral disparities.
Travel and tourism marketing in the US witnessed a sharp decline, causing a drop in passenger traffic. Forecasts show that this year there will be a decline in travel spending by $400 billion. If imputed roughly, it culminates into a total economic loss of $910 billion (in economic output). The Job landscape within the industry will worsen. Even the Indian tourism and hospitality industry is staring at a potential job loss of around 38 million, which is around 70 per cent of the total workforce. Meanwhile in China, tourism estimated during this period accounts for income that is equivalent to 10% of the industry’s total annual income.
Due to China’s embeddedness in the global economy there is a need for putting out fires in various markets. It’s deep integration through economic activities ranging from manufacturing and supply chains accounted for 16% of the world’s GDP. Consumption patterns are changing, with its decline, productivity and output have been disrupted. Within China, overall retailing space is going through polarized performances: non-grocery offline retailers plummeted, while O2O platforms boomed. Wuhan, the origin point of covid-19, is a manufacturing hub for the auto industry. Wuhan is host to top players like Nissan, Honda and General Motors. According to Bloomberg, Wuhan ranks 13th out of 2,000 Chinese cities for its role in supply chains.
Supply chains are affecting the productive capacities of many countries. The worldwide supply of technology would be temporarily constrained, due to the epidemic. Supply-chain disruptions make it difficult for U.S. firms to complete the production contracts on their products while forced closure of some firms have resulted in the fall in real wages of the average worker and rendered many jobless.
The resurging threats of this global pandemic will put to the test the policy and economic preparedness of countries and their globalized interactions. These will feature the worst-case scenario, usually the arrival from abroad of a hypothetical strain of influenza that is both very deadly and highly contagious—a rare combination of features that set apart the Spanish flu which swept the world in 1918, killing 20m-50m people. The interaction of various agents in the biosphere will always lead to unexpected outcomes. As humans explore and encroach on new habitats, urbanize, tamper with the environment, travel and warm the planet, new diseases will become more common. The modern ailments are diversifying its portfolio, introducing the fever from Wuhan to be its latest product. In addition to being exacerbated by globalization, epidemic potential is elevated by the twin phenomena of climate change and geo-political alignments.
Divyansh Singh Parihar is a second year student of O.P Jindal Global University pursuing his major in Economics.