SEATTLE, Washington — The novel coronavirus was first reported in Wuhan, China, on December 31, 2019, as a “cluster of cases of pneumonia.” In January 2020, it was officially declared a world health emergency. The virus managed to spread to more than 190 countries and all states within the U.S. It has greatly impacted the way people interact with each other and greatly damaged the economy at all levels. A Congressional Research Service study predicted that COVID-19 is predicted to cause a minimum of 3% loss in global economic growth in 2020. Global trade is also expected to fall from 13-32%.
The Effects on the Global Economy
With reduced demand for goods and services, a decline in tourism and no business travel, the consequences of a recession are more likely to be devastating for developing countries. Retail and wholesale trade will suffer greatly followed by businesses having to close. Countries that depend on tourism, like the Maldives and The Bahamas, will suffer more as well. However, large agricultural and mining countries, like Liberia, might feel less of an impact.
Economic growth seemed positive for a lot of countries at the beginning of 2020, according to the International Monetary Fund. However, countries that depend on trade, like Canada, Germany, Italy, Japan and Mexico, are projected to have the most negative slowdown in economic activity and growth during the pandemic. As a major player in technology development, China’s production of computers, electronics and pharmaceuticals has also declined. Furthermore, other countries in Asia, such as South Korea, Thailand, Malaysia and Vietnam, are expected to face a recession.
Debt Crisis
Global debt levels hit an unprecedented peak in the third quarter of 2019 with a debt of almost $253 trillion. However, the pandemic could cause debt to reach even higher levels. Corporations, households and governments are struggling to pay debts. Companies, like meat producers, are ceasing production and restaurants are closing. Commodity prices for oil, metals and agriculture have already taken a hit, according to the Bloomberg Commodity Total Return Index.
In households, many are seeing furlough or unemployment. This situation has also affected banks, making it difficult to provide loans during the pandemic. Credit options might not be possible at all in developing countries. Since the outbreak of the pandemic, emerging markets have plummeted. However, developing countries will be the most limited in giving and obtaining financial resources.
However, the pandemic has shone some light into the economic inequalities across the globe and the extent to which the most vulnerable communities will suffer due to the pandemic. The virus infects people regardless of wealth, but because of segregation, low incomes, reduced mobility and the high costs of medical care, many middle to low-income households are more at risk. Low-income communities are more exposed to the virus. During an economic crisis, these communities are also often the most marginalized.
Economic Stimulus in the US
Lena Simet, the senior poverty and inequality researcher at Human Rights Watch, said, “The government should target its economic stimulus packages to the low-income communities that will be hit first and hardest, and ensure an adequate standard of living for all.”
The Families First Coronavirus Response Act was passed by the U.S. House of Representatives and the Senate to attend to families and workers that are affected by the virus. However, according to Human Rights Watch, the legislation only guarantees sick leave to 20% of private-sector workers. Companies with more than 500 employees are exempt while those with fewer than 50 workers can apply for an exemption. Workers with low-wage positions in restaurant chains, supermarkets and retailers are unprotected. Migrant workers and their families have no government support.
Several states and local governments are trying to fill the gaps of the COVID-19 safety net with the support of private philanthropies. California is planning on distributing from $500 to 150,000 undocumented adults. In New York, the Street Vendor Project is working to raise $90,000 to support members. On April 17, 2020, the Open Society Foundations announced $20 million for a relief fund to provide a one-time payment to 20,000 immigrant families in New York City.
Stimulus and Aid Worldwide
Different countries are offering different economic stimulus options depending on their abilities and resources. The Center for Disaster Philanthropy (CDP) is partnering with NGOs to track and respond to emergencies, which includes supporting frontline and healthcare workers by supplying masks, gloves, gowns and other personal protective equipment, among others. “As of July 28, more than $14.4 million has been distributed to 95 organizations working in the U.S. and abroad.”
Many economies in the world are falling due to the pandemic. Families are struggling to pay for essential needs. Some countries are providing financial, mental and physical help with the combined efforts of NGOs, philanthropies and organizations such as the Coca-Cola Foundation, Google Inc. and Target. This will aid in slowing the debt crisis as the government finds solutions to help households who have lost a stream of income.
–Merlina San Nicolás Leyva
Photo: Flickr