Coronavirus Impact on Global Economy – Covid-19 Crashes 2020 Market

21 May 2020
Global Trade Data

Millions of people globally are affected by the Coronavirus pandemic, which has claimed several lives, lockdown public & business and destroyed the global economies. China and the United States, two powerful countries in the world, are severely affected by the virus. China, which was the epicenter of Covid-19, has now recovered and the country has opened the lockdown in many areas. However, the United States has now become a new epicenter of coronavirus as thousand deaths are being reported in 24 hours. The country’s half of the population is under completely lockdown and businesses have been closed.


According to Export Genius global trade data, China’s total trade (imports + exports) valued USD 4,566 billion and U.S. recorded total trade of 4,213 billion in 2019. Let’s have initial analysis of how coronavirus impacts economy of China, the United States and other countries in 2020.  

 

Covid-19 Impact on China Economy


China, once was the epicenter of the coronavirus, is returning to normal as the number of reported local transmission cases hovers near zero, daily life is slowly returning to normal. The country has opened the lockdown in Wuhan province, which was first and badly affected by the Covid-19 pandemic. According to media reports, following changes have been seen from the last couple of days:


·       Factories have reopened – operating at 2/3 of their capacity.

·       Flight capacity from the country is recovering.

·       Apple has re-opened all mainland China stores.

·       Consumers are warily returning to malls and restaurants.


However, economic data from the first two months of the year shows the damage done to the country’s finances. In the present scenario, China has experienced sharp losses in its economy. For instance, the unemployment level in China rose from 5.2% recorded in Dec 2019 to its highest level on record of 6.2% in Feb 2020.


Following figures show China’s business activity slowed considerably as Covid-19 spread.


Economic Indicator

Year-over-year Change (Jan-Feb 2020)

Investment in Fixed Assets (Excluding rural household investment)

-24.5%

Retail Sales

-20.5%

Value of Exports

-15.9%

Industrial Production

-13.5%

Services Production

-13.0%

 

As factories and shops reopen, China seems to be over the initial supply side shock caused by the lockdown. However, the country now faces a double-headed demand shock due to slow production and many other factors:


                           ·       Domestic Demand


The demand of goods by local people in China is slow to gain attraction due to bankruptcies, psychological scars and job losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to restrain their spending habits after the virus.


                           ·       Overseas Demand


The demand of Chinese goods in the international market is suffering as more countries face corona outbreaks. Many stores are closing their stores due to lockdown and fear of virus spread and cancelling orders, leading to an oversupply of commodities.


With a fast recovery seeming highly unlikely, many economists project China’s GDP to shrink in the first quarter of 2020 – the country’s first decline since 1976.


Covid-19 Impact on the U.S. Economy


The United States is now the epicenter of coronavirus, where thousands die in 24 hours. About half of the U.S. population is on stay-at-home orders, severely restricting economic activity and forcing widespread layoffs. In the week ending March 21, total unemployment insurance claims rose by over 3 million, reaching their highest level ever. In addition, manufacturing activity in eastern Pennsylvania, southern New Jersey and Delaware dropped to its lowest level since July 2012. Market analysts have forecasts that the Gross Domestic Product (GDP) of the United States will contract by -24% in Q2 of 2020, followed by +12% growth in Q3.


How Much Business China and U.S. did in 2019?


China ranked on top in global exports, while second in global imports and the United States ranked top in imports and second in exports during 2019. Below given chart and table shows value of total import and export commodities recorded by these two countries in the said year.

Country

China

United States

Total Imports in 2019 (Value USD Billion)

2,068

2,568

Total Exports in 2019 (Value USD Billion)

2,498

1,645

 


Covid-19 Impact on Economy of Other Countries


Other countries are also feeling the economic impact of Covid-19. For example, global online bookings for seated diners have declined by 100% year-over-year. In Canada, nearly one million people have applied for unemployment benefits. Countries such as Italy and Spain are badly affected by the coronavirus pandemic and suffering from high unemployment. They also expect to see economic blows. However, it’s too soon to gauge the extent of the damage.


As many countries are now under lockdown and industries have been under shutdown, the International Monetary Fund (IMF) has forecasted a global recession in 2020. Separately, the United Nations (UN) has estimated that the Covid-19 could cause up to a $2 trillion shortfall in global income.


On the bright side, some economists are forecasting a recovery as early as the third quarter of 2020. A variety of factors such as the number of Covid-19 cases, consumer confidence and government stimulus, will play into this timeline.


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