The Coronavirus (COVID-19) outbreak has brought considerable human suffering and has become one of the biggest threats to the global economy. The outbreak of the virus, which surfaced in Wuhan, China has been spreading rapidly over the past few months. According to the World Health Organisation (WHO), the virus has infected more than 1,10,000 people in at least 110 countries and territories globally. WHO has declared the situation a global health emergency.
China has reported the majority confirmed cases with the number of reported infections rising up to 80,000. Even in India, the number of coronavirus cases has been increasing sharply over the past few weeks, with the total number of COVID-19[1] positive cases rising up to 112. This widespread outbreak of the virus has led to the direct disruption of global supply chains, weaker final demand for imported goods and services and a decline in international tourism and business travel.
Coronavirus Outbreak Effect on Global Economy
Since the outbreak of the virus, China has been in a state of complete lockdown. To contain Coronavirus outbreak authorities of China have locked down cities restricted movements of millions and suspended business operations. All these preventive measures are slowing down the world’s second-largest economy, which, as a result, is adversely impacting the global economy.
Following points describe the impact of the outbreak on the global economy:
- Manufacturing Slowdown
China is the world’s biggest producer of manufactured components. Since the lockdown, due to the outbreak of the virus, the manufacturing sector has observed a serious dip in China. This slowdown in Chinese manufacturing is affecting the countries with close economic links to China as well. In the past month, China has observed a dramatic reduction in its manufacturing Purchasing Manager’s Index (PMI) to 37.5, which is the lowest reading since 2004. This significant drop implies a 2 per cent reduction in output on an annual basis.
- The decline in Service Sector
The Coronavirus outbreak in China has also impacted the country’s service industry. Since the country is in a state of a lockdown, consumer spending has decreased drastically, which as a result is hurting retail stores, restaurants and aviation, among others. The service sector has not only weakened in China, but other countries like the USA also observed a decline in the service sector.
- Declining Oil Prices
China is the world’s largest crude oil importer. Since the outbreak, the demand for oil has gone down taking oil prices to multi-year lows.
- Stock Market Plunges
As an impact of the fear surrounding COVID-19, the stock prices of major markets have gone down.
Impact of Coronavirus on Indian Economy
India is among the most affected economies because of coronavirus epidemic. The trade impact of coronavirus outbreak for India is estimated to be about 348 million dollars. However, the trade impact for India is less as compared to other economies such as Japan, South Korea, U.S.A etc.
- Impact on Tourism Sector
The Tourism sector of the country is facing its worst times since all the bookings for the next two-three months have been cancelled. India attracts nearly one million foreign tourists every month. But, travel restrictions could impact the inflow of tourists in the country. Annual earning of India from foreign tourists is around $30 billion, and the industry is worried about the global spread of the virus harming their income.
- Impact on Textile Industry
China’s Coronavirus shutdown is affecting the Indian Textile and apparel industry. Indian manufacturers who are dependent on the supply of raw materials from China are facing issues in the manufacturing process. Since India does not have a domestic supply base to cater to the huge demands of raw materials, manufacturers are dependent on China for the supply of raw materials.
Take Away
Since China matters as a source of demand and a source of supply for the rest of the world, the outbreak of Coronavirus has adversely impacted the global economic scenario. To prevent the further spread of the virus, Chinese authorities have restricted movement of millions and suspended the business operations which is slowing down China’s economy and dragging down the global economy as well.
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