Global stock markets have fallen sharply as investors continue to worry about the broader economic effects of the coronavirus. (Source: BBC)
How could COVID-19 affect you as a consumer?
Let’s take a look at the pie chart below that depicts the % share of the global economy. (Source: IMF)
China is sometimes referred to as the “world’s factory” due to its massive manufacturing and export base. According to this estimation, China’s top 10 exports accounted for approximately two-thirds (67.7%) of the overall value of its global shipments in 2018.
It is fair to say that whatever happens to the countries that take a significant chunk of the global economy, happens to the rest of the world.
What is the situation like?
Car dealerships, restaurants, shops in China have seen a noticeable fall in demand.
Fewer people decide to leave their homes, hoping to avoid the virus.
The travel industry is largely impacted. Flights are getting canceled around the world.
In the case of Jaguar Land Rover, Chinese car parts are flown to the UK in suitcases due to supply chain issues.
Logistics is a vital component of successful trade. Without it, prices on imported products will climb up. In February, China took measures to temporarily “stop” their economy, the idea that was met with wildly negative criticism.
Bloomberg Economics has been releasing weekly estimates, which show that “China’s economy is running at 60%-70% of its normal level in the last week of February, up from 50%-60% the previous week.”
The economic impact of the coronavirus on the U.S. could potentially turn out to be more damaging than the impact on the Chinese economy. Moreover, it is the developed countries that are at the highest economic risk.
For instance, sports is a huge business in the United States. Americans spend $56 billion on sporting events. If the virus starts spreading at a faster rate, very few of us will be buying tickets to watch a game.
Governments around the world are taking action to relieve the global economy. Such organizations as the IMF and the World Bank have contributed billions of dollars towards the outbreak aftermath. In addition, Trump signed an $8.3 billion emergency coronavirus aid package.
Dear reader, do not panic. The number of cases in China is already falling significantly. Moreover, any considerable change in our consumer behavior will only harm us. Stay safe, wash your hands more regularly, and don’t read too much news.