In Focus: Covid-19 and the global economy

By Nidal Abou Zaki

DUBAI 12 April 2020: The year 2019 was a challenging period for the international community. Conflicts involving some of the world’s largest global economies and domestic issues with large-scale consequences had dragged down international growth and made global investors worried and anxious. Before the year ended, however, another threat had emerged and, this time, it proved to be a crisis of great magnitude.

The coronavirus disease (Covid-19) pandemic, which first victimized the residents of Wuhan in China, has now spread to more than 190 nations and territories since it was first discovered in late December 2019, infecting at least 668,000 people worldwide as of this writing. New cases are still being reported everywhere, putting heavy pressure on the healthcare industry, while authorities scramble to find a way to stop the infectious virus that is causing the disease.

To contain Covid-19, travel bans and quarantines have been imposed in many communities in developed and developing countries alike for a long period – effectively slowing down activities in all industries.

Nidal Abou Zaki

The impact on the economy has been swift. Stock markets are spiraling down, with the Dow Jones in New York experiencing its worst levels yet since 2008; and businesses in several sectors, except those that are deemed essentials during these times such as food and banks, are shutting down their operations to mitigate losses. People have been forced to stay at home and told to not report to work, in the meantime, and observe social distancing to halt the virus’ human-to-human transmission.

Air transportation, hospitality, restaurants, leisure, and travel are some of the industries that have already been weighed down by this health crisis in terms of returns. Some of the manufacturing businesses may also take a hit. For instance, the manufacturing output in China had already witnessed a 13.5 per cent contraction as per an online article posted on voxeux.org, which also noted that the economy of the Asian economic superpower had gone down for “the first time in many decades” during January-February 2020 due to the coronavirus crisis. Some experts agreed that a global recession, which could last for a year or two, is maybe on the horizon.

Stimulus Packages

To aid the affected workers and businesses as well as inject energy into the economy, many countries, including the US, Germany, France, Sweden, and Denmark, have rolled out various comprehensive economic stimulus packages, which include deferment of credit payments and other guarantees.

n the UAE, a Dh16-billion economic stimulus package was recently approved as part of the Federal Government’s steps to reduce Covid-19’s impact on the economy, bringing the country’s stimulus packages to Dh126.5 billion to date. The government also issued major policies to support enterprises, most especially the small ones, ensure business continuity, and fast-track key infrastructural developments.

Changes Coming

Not everything is doom and gloom, however. One expert believes that the global health crisis will lead to major reforms to ensure that future pandemics such as Covid-19 are averted. New ways of doing things, including the work-from-home arrangement and fewer business travels, may pave the way for new mindsets and frameworks that will be beneficial for all.

Understandably, many investors have taken the wait-and-see stance as they remain cautious of the full impact of the still-developing Covid-19 outbreak. Much is at stake as the global community navigates through the current terrain and tries to keep afloat amid the crisis.

Note: The author is Managing Director, Orient Planet Group

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