Category: Coronavirus

The Effects of Coronavirus on the Economy of India

Coronavirus pandemic has created huge disruption on the economy. India’s growth for the fiscal year 2021 has been downgraded by credit rating agencies. Coronavirus has degraded the economy throughout the world. It has deeply affected the economy at both macro and micro levels. Many employees are losing their jobs or facing salary cuts. Some businesses are being significantly affected. India may have a negative growth rate for the financial year 2021. Let us look at how Coronavirus has affected various parts of the economy.

India changed its Foreign Direct Investment (FDI) policy on 18 April 2020. This has been done to prevent acquisition of Indian companies due to Coronavirus pandemic. As the global share prices have decreased, China may take advantage of this situation. This can lead to hostile takeovers of Indian companies. The new FDI policy has restricted countries but not markets. The Ministry of Commerce and Industry will now scrutinise all FDI from countries which share land border with India. The Government of India is trying to allure companies which are looking for an alternative to China. So, companies are being told to ready pro-investment strategies.

Due to lockdown, people are restricted from buying vegetables and fruits. This has caused the perishable products to degrade which led to loss. Farmers all over the country are facing uncertainty. Tea estates faced logistical problems because of which they were unable to harvest. The Darjeeling tea-based industry is facing loss and tea exports may drop as a result. After the lockdown guidelines have been relaxed, some agricultural businesses have reopened. They include tea, coffee, dairy and rubber plantations.

Major Indian manufacturing companies have reduced their operations due to Coronavirus pandemic. They have either temporarily suspended or significantly decreased their operations. The companies include Ultra Tech Cement, Larsen and Toubro, Grasim Industries, Tata Motors, Bharat forge, Aditya Birla Group and Thermax. Companies that produce iPhone have also suspended some of their operations. Almost all two-wheeler and four-wheeler companies have halted production till further notice. Some other companies have also suspended production following lockdown orders.

The business of E-commerce companies has been affected because of logistical problems due to lockdown. Amazon has stopped the sale of non-essential items in India. It is only selling the essential needs of customers. Flipkart has temporarily suspended some of its services and is selling only the essential products. Bigbasket and Grofers have restricted their services and their business has been disrupted. Delivery agents of E-commerce companies have been issued curfew passes in order to carry on the supply chain. Swiggy and Zomato are not allowed to operate their services in this time.

The Department of Military Affairs has postponed all capital acquisitions due to Coronavirus pandemic. There will be no new major deals in defence during the beginning of this financial year. The delivery of S-400 missile systems will not be affected but the delivery of Rafale fighter jets may be affected.

Stock markets have been affected because the companies are having losses. Stock market in India had worst losses in history on 23 March. SENSEX and NSE NIFTY fell by many points. However, the situation improved in few days. SENSEX had its highest gains in 11 years on 25 March. The stock markets in India rose again on 8 April. Nifty held the 9500 mark by 29 April. The stock market has become stable after having losses.

Lockdown has broken down essential supply chain and logistics. Inter-state movement of raw materials is necessary for the food processing industry. That’s why the Managing Director of Britannia industries requested Government to allow inter-state movement of raw materials. Otherwise this supply chain problem could have caused shortage of food. The movement of medical goods has been affected due to disruption in supply chain.

The salaries of many employees have been cut in some organisations. The Prime Minister of India urged high- and middle-income segments of society to donate some money. People have been asked to donate money to Prime Minister Relief fund. In some states where the impact of Coronavirus pandemic has been too high, donation to Chief Minister Relief fund has also been made. Government bank employees faced salary cut of one working day from their monthly salary. Prime Minister told to give the salary of domestic help. He requested companies to keep paying the employees.

Daily workers have lost their work due to Coronavirus pandemic. They do not have any fixed monthly salary. Because of lockdown, they are not able to go out and work. Lockdown has halted the movement of vehicles. It includes trains, buses, taxis, autos and metros. After lockdown was imposed, many migrant workers had to go back to their homes. They ended up walking to their homes, which were large journeys. Then Central Government took measures to improve the condition of labourers. The migrant workers and labour force are being provided with food and medical essentials like masks, medicines and sanitizers.

China is the largest exporter and second-largest importer in the world. Because of Coronavirus pandemic, China’s condition will impact the industries of India. India depends on China to a great extent in imports. China has a significant share in the top twenty products that India imports from the world. India imports organic chemicals, inorganic chemicals, dyes, medicinal and pharma products from China. Due to the COVID-19 crisis, import dependence on China will have considerable impact on Indian industry. China is the third largest export partner of India and accounts for nearly 5% share. India exports plastics, cotton, fish products and ores to China. This supply chain has been affected.

Many Indian companies have their offices in foreign countries also. Some companies work for foreign clients and get payment from them. Coronavirus pandemic has greatly affected multinational, global and transnational companies. It is because Coronavirus has spread throughout the world. Companies have decreased their operations since their employees in all locations are unable to work now. Organisations are having losses now and they will need time to recover from this crisis. Due to this they have stopped recruiting new employees and are deducting the salaries of existing employees.

Coronavirus pandemic has disrupted the career of students who completed their course in 2020. Some students who had got placement offers in their college recruitment process have lost their offers. Internship offers given by some companies got cancelled due to Coronavirus pandemic. Students of numerous colleges are facing hardship now. This is applicable to students studying any field of education. Those companies who have not cancelled the placement offers, will delay the joining of 2020 pass out students. Because of these students and their families are suffering.

COVID-19 crisis has led to an unknown collapse in economic activities. It is having a very high impact on business. Due to Coronavirus pandemic, businesses are having uncertainty about future. The severity of this outbreak will decrease the GDP of India.

Supply and Demand During Covid-19

The World Health Organization has declared the COVID-19 (Corona Virus) a global pandemic. The COVID-19 outbreak has affected the majority of businesses across the globe. This includes both small and large business enterprises as well as the global market at large. The price of commodities has risen due to the decrease in their supply. Some of the basic commodities have gone out of stock while others are still available but in small amounts. Being a worldwide pandemic, every economy has been highly affected. The medical sector has been extremely affected as every country focuses on employing more health workers in an attempt to curb the spread of the virus. Research shows that most there is panic buying has been experienced in most countries across the globe. Vulnerable populations are at higher risk of these shortages due to socioeconomic inequalities. This paper, therefore, will discuss the impact of the COVID-19 on supply and demand theories.

Demand relates to how much goods and services consumers can afford at a given period. The law of demand identifies price as the major factor that determines what the customers are able and willing to buy. Other factors include the change in taste and preferences, quality of a commodity, the income of the consumers, and consumers’ expectations of future changes in prices. On the other hand, supply can be defined as the number of goods and services produced by manufacturers in a given period. It can also be defined as the quantity they avail in the market at a given period. Similarly, the amount available in the market by producers depends on how much it costs to produce them. In economics, the supply and demand for commodities are used to determine the market price of these commodities. When the quantity of goods demanded by consumers equals the number of goods supplied, an equilibrium achieved.

COVID-19 pandemic has raised major concerns on issues regarding medical supplies. Pharmaceuticals and medical products have become essential commodities during this pandemic. Ventilators, gloves, masks, gowns, and surgical drapes and hand sanitizers are among the main necessities at this time both for health care workers as well as the public as a whole. According to Gryta, T., & Adams, R. (2020), medical commodities are generally in shortage as it is difficult to import since the virus is across the World, and every government is working on fighting the various at home. Most countries, however, have been forced to start producing them locally. The continuous spread of the virus has increased the demand for testing equipment, ventilators, and other products. As a result, there is a possibility of shortages of these commodities as the virus continues to spread. In other words, the demand for equipment is higher than the supply in the market. The price of these commodities is lower than the equilibrium, thus resulting in excess demand. Excess demand results in more supply of commodities, and this competition leads to lower prices in the market. The lower price of the commodities may lead to low supply, thus a probability of higher prices in the future to achieve equilibrium (VIR, 2020). Also, it is not known how long it will take to curb the virus as no single vaccine has been identified so far. People are therefore flocking in shops and supermarkets as they prepare to fight the coronavirus. Prices of essentials are on the rise as there are shortages in the supply and availability of raw materials. Also, all governments have put in place strict measures in the attempt to stop or reduce further spread of the virus. This includes reduced movements of people, especially through flights (Gryta & Adams, 2020). Flights have been stopped in almost all countries across the globe, making it hard to acquire raw materials and other commodities from other countries. Besides, the virus has now spread in almost all countries in the world. As a result, all businesses have been affected in all countries.

Technological advancement in China makes it the leading country worldwide in the production and supply of commodities (Volkin, 2020). For instance, the high number of infections in the country forced the government to reduce exports of commodities for local use. As a result, countries depending mainly on China’s supplies have been largely affected by this pandemic as they have been left with no option but to depend on the limited resources in the countries.

Furthermore, the virus is spreading at a high rate such that every day, there are newly recorded cases. This means the demand for medical supplies is rising in every 24 hours. The demand for protectives such as masks and hand sanitizers is rapid as people are working on protecting themselves and their families at large. However, this demand is not experienced equally across the countries due to the gap in financial status. According to PYMNTS (2020), consumer behavior has changed as people have now shifted to e-commerce due to lockdowns. This limits the number of businesses on the operation as only a few have enrolled in online business. The financial markets have been greatly affected by the pandemic due to logistics in supplies involved. Despite the high risk of contracting the virus, these essentials remain unaffordable to these individuals; thus, this law does not apply.

Apart from healthcare-related businesses, the COVID-19 pandemic has affected all other businesses across the globe. The mode of transmission of the virus is the main concern, thus the closure of many businesses. For instance, the ban on the use of public transport in many countries has prevented people from going to work. Also, many countries have been on lockdown, while others are initiating curfews forcing people to work from home. This means small business operators cannot work as their businesses require them to be at the workplace for them to be operational (Abedejos, 2020). Also, the shortage of supplies has affected these businesses, forcing most of them to close down. Moreover, most IT companies have been forced to shut, as working from home rule out does not favor them. Also, a majority have reported delays in the delivery of the required tech hardware since the COVID-19 outbreak (Clark, 2020). This constrained supply has left people with no options than to switch to refurbished products. The social distance has also affected other businesses like restaurants. Almost all countries have issued a directive that minimizes the crowding of people in one place. The restaurants have been forced to stop their normal operation and adopt takeaway or online services. Also, most people now avoid eating from these restaurants in fear of contracting the virus. As a result, the demand for food in these restaurants has gone low. Most have been forced to close due to losses incurred and the inability to pay their employees.

In conclusion, the COVID-19 pandemic has affected all businesses across the globe. Despite the government pressures on trying to maintain normal prices of commodities, the scarcity of raw materials ends up raising the price of these commodities. The demand for medical commodities and protectives is in high demand. However, their availability has also been affected as the virus is still spreading. Besides, the curfews and lockdown have also affected the operation of many businesses, especially the small business operators who cannot work from home. The few who are operating have fewer operating hours while a majority can access raw materials or stock. However, the measures put by most governments are helpful despite the effects on these businesses as they will assist in preventing the spread of the virus.

References

1. Gryta, T., & Adams, R. (2020). Coronavirus Is Different. It’s Rapidly Hitting Supply and Demand. The Wall Street Journal.
2. Volkin, S. (2020). How has COVID-19 impacted supply chains around the World? Johns Hopkins Magazine.
3. PYMNTS. (2020). eCommerce Drives Industrial Real Estate Boom. The Register.
4. Abedejos, I. (2020). How COVID-19 Is Affecting Small Businesses and What Can You Do. Business 2 Community.
5. Clark, L. (2020). Supply, demand, and a scary mountain of debt: The challenges facing IT as COVID-19 grips the global economy. The Register.

The Impact of the Covid-19 Pandemic on the Australian Economy

Macroeconomics and microeconomics play a crucial role in determining monetary and fiscal policy within the Australian economy. Through recent developments of the Covid-19 pandemic. The current disease causing widespread global economic crisis is the coronavirus (Covid-19). The potential impact this disease has on the Australian economy is major. As it has forced reduction of person-to-person contact, closure of state borders. These restrictions have led to a rise in unemployment and sparked fear of economic recession. The Australian government, the Reserve Bank of Australia and the National Treasury have implemented economic plans and policies to calm the storm that the pandemic has brought upon Australia’s prosperous economy. Fiscal, and monetary policy will be analyzed along with the impact of unemployment, supply and demand and global domestic product have on Australian economic policy during the coronavirus pandemic. Fiscal and monetary policy have a strong correlation with macro- and microeconomics in Australian. The Reserve Bank of Australia’s review or economic policy along with the treasuries financial response to Covid-19 will be analyzed, and macroeconomic and microeconomic theories related and discussed within the Reserve Bank of Australia will be analyzed. These being unemployment, GDP and supply and demand.

Firstly, fiscal policy can be related to policies in which the government reduces revenue income and invest into the economy this can be exampled through tax revenue contrasted to current Australian stimulus support. As Australia is a small, open developed economy it has a floating exchange rate. Theories of economy suggest that fiscal expansion will produce higher interest rate that in turn will reduce expenditure. The Reserve Bank of Australia has the primary role of being Australia’s central bank. The RBA is responsible for maintaining financial system stability, financial system payments and banking services to the financial sector and to the Australian government. However, an important fact of the RBA is its role in determining monetary policy. In order to avoid harsh economic deficit, the RBA enacted recent policy adjustment in which the Reserve Bank Board reduced cash rate twice within March 2020. This intern This is boosting the cash flow of businesses and the household sector as a whole. It is also helping Australia’s trade-exposed industries through the exchange rate. At the same time, low interest rates do have negative consequences for some people, especially those relying on interest income.

As a result of state and federal government restrictions of border closure, travel and leisure activities Australian economy has seen a large spike in unemployment rates and reduce number of working hours. The macroeconomic concept of unemployment has large implementations on the nation’s economy. According to the Reserve Bank of Australia’s may report on economic overview it has been analyzed that Australia’s unemployment rate is set to rise to 10% by the end of the June period (Reserve Bank of Australia, 2020). Fiscal policy response has been attributed to the government’s economic response to support households and business through this time of uncertainty. The document release by the Australian Treasury outlined plans in which timely support to workers, businesses and households will be provided (Reserve Bank of Australia, 2020). The fiscal policy utilized by the Australian Government is further designed to position Australia’s economy in order to strongly recover once the health crisis has been overcome. The IMF and OECD have indicated that Australia is one of the advanced economies in the best positions to provide fiscal support without endangering debt sustainability. From government documents the response to unemployment and lower working hours has been the fiscal implementation financial support and economic stimulus. This can primarily be seen from the governments Jobseeker and Job keeper payment schemes along with early access to super annuation. The scheme is designed with the goal of supporting business in managing cash flow challenges, supporting individuals and impacted regions and communities

The macroeconomic principle of Gross Domestic Product (GDP) has been established through the Reserve Bank of Australia’s economic outlook in its statement of monetary policy (Reserve Bank of Australia, 2020). This document outlines the RBA’s response along with the cooperation of the treasury and Australian government, in which policy will be enacted to assist in maintaining Australia’s economy. The Australian economy is expected to record a contraction in GDP of around 10% over the first half of 2020. This correlates with the macroeconomic concept of unemployment as total hours worked are expected to decline by around 20% and the unemployment rate is forecast to rise to around 10% in the June quarter (Reserve Bank of Australia, 2020). However, the document by the RBA outlining monetary policy outlined. The fiscal response of Australian government e in maintaining current GDP has been examined from its consolidation packages of $320 billion. This is represented through fiscal and balance sheet support across forward estimation of 16.4% of Annual GDP. What has been analyzed is that the stimulus is designed to provide support and assistance to businesses and households through the period of economic uncertainty ahead. National interest has taken precedent over the matter and has resulted in updates in light of broader and potential prolonged impact resulting from the corona virus outbreak (Australian Government, 2020). It is also designed to position the Australian economy to recover strongly once the health challenge has been overcome. The IMF and OECD have indicated that Australia is one of the advanced economies in the best positions to provide fiscal support without endangering debt sustainability. As stated in the Australian Government document on recovery plans the economic recovery primarily focuses on the easing of restrictions which in turn will lead to improvement in employment outcomes for businesses when re-opening. This in turn will pick up household expenditure and lead to business investment decision making taking effect.

The microeconomic concept of supply and demand has been seen to have economic impact on Australian economies and markets. Due to increased unemployment decrease working hours and largely as a result of lower fuel prices and free childcare headline inflation is anticipated to be negative during the June period. Due to social distancing and restrictions on borders supply has been at an all-time low while demand has slightly risen. This can be primarily seen from retail such as Woolworths and Coles and its corporations such as biotech (Australian Catholic University, 2020). Another major supply issue came from supply chains for PPE as countries grapple with the spread of Covid-19. Supply and demand can be seen to have strong correlations with unemployment and lower working hours as people are more readily able to purchase goods however cash inflow to families is on a lower scale (Australian Catholic University, 2020). Unemployment can be further correlated with supply and demand as lower revenue production by business impacts cost and benefits and labor forecasting. If labor costs are higher than revenue production, then companies and business must reevaluate their expenditure (Australian Catholic University, 2020). This balancing of supply and demand was noted by the RBA’s economic overview and the Australian government further recognized this through its stimulus support packages to businesses, this being the job-keeper allowance.

Macroeconomics and microeconomics play a crucial role in determining monetary and fiscal policy within the Australian economy through recent developments of the Covid-19 pandemic. The current disease causing widespread global economic crisis is the coronavirus (Covid-19). The impact this virus has had on the Australian economy is major. The government through its use of monetary and fiscal policy has eased the economic burden that corona virus has caused. The macroeconomics of unemployment and GDP and microeconomics of supply and demand, where analyzed from documents from the Australian Government, the Reserve Bank of Australia, and the National Treasury.

References

1. https://leo.acu.edu.au/course/view.php?id=33594§ion=14
2. https://leo.acu.edu.au/course/view.php?id=33594§ion=15
3. https://www.afr.com/markets/debt-markets/deficit-is-not-a-dirty-word-it-s-time-for-bold-fiscal-policy-20200531-p54y2w
4. https://www.rba.gov.au/publications/confs/1998/pdf/debelle-vickery.pdf
5. ACU, 2020. Lecture 8 GDP. [Online] Available at: https://leo.acu.edu.au/mod/resource/view.php?id=3030637 [Accessed 2 June 2020].
6. Australian Catholic University, 2020. ECON200 Economics: Policy Frameworks and Markets; Lecture 2 Supply and Demand, Brisbane: ACU. Australian Government, 2020. Economic Response to the Coronavirus. [Online] Available at: https://treasury.gov.au/sites/default/files/2020-03/Overview-Economic_Response_to_the_Coronavirus_2.pdf [Accessed 2 June 2020].
7. Chappelow, J., 2019. Nominal Gross Domestic Product. [Online] Available at: https://www.investopedia.com/terms/n/nominalgdp.asp [Accessed May 2020].
8. Reserve Bank of Australia, 2020. Domestic Economic Conditions: Reserve Bank of Australia. [Online] Available at: https://www.rba.gov.au/publications/smp/2020/may/domestic-economic-conditions.html [Accessed 1 June 2020].
9. Reserve Bank of Australia, 2020. Reserve Bank of Australia: Economic Outlook. [Online] Available at: https://www.rba.gov.au/publications/smp/2020/may/economic-outlook.html [Accessed 2 June 2020].
10. Reserve Bank of Australia, 2020. Statement on Monetary Policy – May 2020. [Online] Available at: https://www.rba.gov.au/publications/smp/2020/may/international-economic-conditions.html [Accessed 1 June 2020].
11. Reserve Bank of Australia, 2020. Supporting the Economy and Financial System in Response to COVID-19. [Online] Available at: https://www.rba.gov.au/covid-19/ [Accessed 2 June 2020].

The Effect of Coronavirus on Companies in the Egyptian Stock Market

This paper aims to examine the effect of the spread of Covid-19 on the Egyptian companies trading in stock markets. The outcome of such an infectious disease is regarded as serious. It actually affected stock markets worldwide. Using an event study method, our results indicate that the stock markets in major affected countries and areas fell quickly after the spread of the virus. Egypt is one of the highly affected countries with a high rate of deaths. Further panel fixed effect regressions also support the adverse effect of Covid-19 confirmed cases on stock.

Introduction

The date 31st December 2019 marks first identification of the first case of Covid-19, which the World Health Organization (WHO) identified in Wuhan China. During January 2020, Wuhan was not the only country with Corona virus but China witnessed a huge spread in almost all the states. One of the main reasons of the virus spread is a huge movement of people towards their hometowns to celebrate Chinese New Year. Despite Wuhan officials declaring a complete the outbreak of the virus continued to be very rapid. The WHO declared a global emergency because of the outbreak of Covid-19 by the end of January, 2020. The rapid spread of such a contagious disease does not just affects people’s health and lives, however, it seriously has a negative impact on the economic growth (Liu et al, 2020).

There are various factors that affect the market participants’ decisions. Covid-19 created multiple challenges to personal lives, such as lockdowns (or lockdown-like situations) for a large number of people. Further, all over the world people started to be scared because of the huge number of death and catching the fast-spreading infectious disease. This panic wave can easily lead to the decline of the economic trends and sudden changes in the investor’s sentiments (Liu et al, 2020). Bad mood and anxiety can negatively affect investment decisions; anxious individuals may be more pessimistic about future returns and therefore tend to take fewer risks. Anxiety is usually followed by negative feelings, these feelings affect investment decisions and the subsequent returns on assets (Kaplanski and Levy, 2010).

Research Problem

The consequences resulted from Covid-19 propose a chance to evaluate the pandemic’s impact on the stock markets of affected nations because of an unforeseen and feared disease. This paper aims to examine the impact of the outbreak of Covid-19 on the performance of Egyptian companies in stock markets.

Literature Review

The Effect of Epidemics/Pandemics on Economic Growth

Over the last centuries, medicine witnessed a remarkable progress in various diseases. However, certain infectious diseases including influenza and malaria stood as obstacles before medicine even in developed countries. Some of these diseases have been contained successfully and are only found within a few geographical areas (endemics). Unlike other diseases, which have the ability to spread quickly from an initially limited outbreak, are regarded as epidemics or pandemics (European Union, 2020).

The spread of a virus not only affects the health of human beings but it also has negative economic implications. Multiple studies focusing were conducted to investigate the impact of epidemics and pandemics on the economy (European Union, 2020).

The European Union published former articles, in which it provided and estimation of the total value of losses (including lost income1918 pandemic), could reach about US$500 billion per year; about 0.6 % of global income. It also mentions the estimated proportion of annual national income represented by these losses varies according to income groupings, with lower-middle-income countries being more severely impacted (1.6 %) than high-income countries (0.3 %). In 2019, WHO published a report along with the World Bank presenting the impact of a pandemic, and mentioning the total cost to 2.2 %-4.8 % of global GDP (US$3 trillion).

Studies that aimed to examine the macroeconomic impact in the past of pandemics and of other infectious diseases such as SARS and HIV/AIDS, estimated the results regarding lost output and growth. The strange thing is that some studies contradicting the majority of studies and claims that pandemics or epidemics can affect economy positively (Lars Jonung & Werner Roeger, 2006). Brainerd and Siegler (2003) studied the economic effects of the Spanish influenza, claimed that the 1918-19 pandemic in the US actually increased economic growth in the 1920s. Young (2004) also agreed that the AIDS epidemic in South Africa will increase net future per capita consumption using a theoretical economic model.

On the contrary, Bell and Gersbach (2004) explained strong negative effects that will occur as consequences. Thus, studies of the past help people figure out valuable information about the proper assumptions to make when ‘guesstimating’ the macroeconomic impact of future pandemics (Lars Jonung & Werner Roeger, 2006).

Estimating the economic effects, it is easier to differentiate between supply and demand effects. The supply effects increase from a loss in hours worked, however the demand effects or psychological effects result mainly from precautionary measures taken by the population to avoid infection. Certain activities namely travelling and meeting and socializing with other people in restaurants, bars, cinemas, etc. are going to be reduced normally (Lars Jonung & Werner Roeger, 2006).

According to Siu and Wong (2004), the spread of Hong Kong’s SARS epidemic along with its economic outcomes suggests that the real serious negative impacts were actually presented on the consumer side, besides on the short-term local consumption and the export of tourism and air travel-related services is seriously affected. Lee and McKibbin (2004) applied the G-Cubed (Asia Pacific) model on the global economic impacts of the severe acute respiratory syndrome (SARS). They both agreed that the effect of the SARS epidemic is not only severe as a disease but it also negatively affects the financial integration and globalization; any economic shock to one country spreads rapidly to others. Further, the 2014 Ebola outbreak has affected US asset prices (Marinˇc, 2016). The results reflected the general negative effect on stock prices, a significant impact on local trading, and less stable industries.

DeLisle (2003) investigated the impact of the SARS virus on stock markets and how resulted in losses as high as in the financial crisis of Asia, estimated at $3 trillion value in GDP 19 and $2 trillion value in financial markets equity. Whereas, Nippani and Washer (2004) examined the outcome of the spread of SARS on several countries; Canada, China, the particular administrative region of Hong Kong, Indonesia, China, Singapore, the Philippines and Vietnam and Thailand. The results of their study showed that SARS only affected the stock markets of China and Vietnam.

Another study examined the 78 mutual equity funds geographically based in African countries with observed monthly flows (Del and Paltrinieri, 2017). The study found out that during 2006 to 2015 that Ebola and the Arab Spring had a severe impact on the funds flows, resulting in a control in the performance of the funds, spending, and returns of the market.

In addition, Chen, Shawn, and Gon (2012) examined the consequences of spread of the SARS on the efficiency of Taiwanese hotel stocks. They applied an event study approach and the results showed that seven publicly traded hotel companies faced severe declines in income and stock price. Taiwanese hotel stocks were significantly affected especially the abnormal returns on and after the day of the SARS outbreak on the performance in hotel stock.

Chen et al (2018) analyzed epidemic of SARS and its outcome on China’s long-term relationship with four Asian stock markets. The results showed the existence of a time-varying co-integration relationship in aggregate stock price index. The findings also presented how the SARS epidemic has weakened China’s long-term relationship with these four markets. Bai (2014) and Baker, Wurgler, and Yuan (2015) agreed that investors according to the recent circumstances may feel afraid to invest in a given market and may feel afraid to also sell market’s stocks under communicable disease outbreak.

Stocks markets are not regarded as individuals but rather connected and interdependent. Further, Chiang, Nam, and Li (2007) tackled the daily stock return for nine Asian markets since 1996 to 2003 and found that there was a high correlation among sample Asian countries during the period of crises. Besides, the global stock markets were becoming more interdependent and crisis in one country would soon spread to another. Stock market movements become increasingly correlated (Morales and Andreosso, 2012). Thus, infectious disease outbreaks can lead to negative changes in investors’ which highly affects their investment decisions and by default affects the stock market prices. (Lars Jonung & Werner Roeger, 2006)

The Effect of Covid-19 on the Egyptian Economy

OECD (2020) reported “the main index of the Egyptian Stock Exchange (EGX30) has declined by 39% since the peak on 9 February, reaching EGP 10 154 on 16 April 2020”. The government announced certain measurement for the citizens and firms. For the purpose of industrial usage, the price of natural gas and electricity declined. Natural gas for industrial use will be priced at USD 4.50 for MMBtu, down from USD 5.50. Whereas electricity for heavy industry will be priced at 0.10 EGP (USD 0.0064) per kilowatt hour, down from 1.10 EGP. Regarding the price of electricity for other industries, it will be kept stable for three to five years. Further, the government offered a certain delay for repayment of loans for SMEs. The Central Bank also introduced credit lines for tourism enterprises in order to make it easier for paying of salaries and financial dues for suppliers. To illustrate, these credit lines can be paid over a maximum of two years with a six-month grace period. Moreover, the National Bank of Egypt and Bank Misr offered a one-year deposit program with a 15% interest rate. The Export Subsidy Fund will pay out the entire EGP 1 billion in arrears in March and April 2020, plus 10% in cash payments to exporters in June 2020. Regarding property tax, companies in the industrial and tourism are offered three months extension for the payment of property taxes for sector. The property taxes shall be payable in monthly installments over the following six months. Therefore, the Egyptian Center for Economic Studies estimated that the impact of Covid-19 on the Egyptian economy till June 2021 shows a decline in travel and tourism, lower domestic consumption, capital outflows, and reduced remittances. They also predict a weaker global trade which will reduce Egypt`s exports and earnings from the Suez Canal. Further, foreign direct investment is expected to decline and will solemnly increase gradually by June 2021. (OECD, 2020)

The Consequences on Egyptian Firms Trading in Stock Market

The American Chamber of Commerce in Egypt published a research note about the current state of Egyptian companies trading in stock market. Covid-19 literally affected all global markets in a negative manner, estimated by double-digit retractions since the beginning of February. However, global equity markets sensed some recovery in the third week of March after the U.S. Senate approved a USD 2.2 trillion stimulus package as a result of weeks of negotiations. The Egyptian exchange suffered as a result of the full effects of the global turbulence in the first week of March, despite all the gains it made since the beginning of 2020. March 1 marked the huge trading loss since 2012 with the benchmark EGX 30 tumbling north of 6%, triggering the circuit breaker to pause trading for the first time since September 2019. Circuit breakers reported for five times this month, and by March 19, the EGX 30 was regarded as the MENA region’s worst performing index, falling by about 22% between March 15 and 19, and by 37% since the beginning of the year. A number of companies, in an attempt to support falling shares, are filed for buybacks of treasury stocks such as Palm Hills Developments, GB Auto, Orascom Development Egypt, Madinet Nasr Housing & Development, Eastern Company and Sidi Kerir Petrochemicals Company (SIDPEC), among others. As a result of the significant losses, state-owned NBE and Banque Misr injected a combined EGP 3 billion in the market on March 19. On March 23, the CBE got EGP 20 billion worth of equities — about 5% of the EGX 100’s market capitalization so that it could to support asset prices amid uncontained market volatility (Amcham, 2020).

Conclusion

Corona Virus has spread vigorously in about 176 countries. This outbreak led to a significant decline in the economy of these countries. Egypt, first, reported a case of Covid-19 on March 8, when a 60-years old German tourist tested positive. By March 30, the Ministry of Health has reported 609 confirmed cases of Covid-19. As reports about the Covid-19 outbreak severity hit global media, February witnessed delays in Chinese imports at Egyptian ports, companies started to feel the decline and the losses.

This paper attempted to illustrate the effect of the virus on the companies trading in stock market in Egypt. The EGX 30 was regarded as the MENA region’s worst performing index, falling by about 22% between March 15 and 19, and by 37% since the beginning of the year. Several firms tried to support falling shares by filling for buybacks of treasury stocks such as Palm Hills Developments, GB Auto, Orascom Development Egypt, Madinet Nasr Housing & Development, Eastern Company and Sidi Kerir Petrochemicals Company (SIDPEC), among others. The Virus actually not only cost Egypt several lives and many others are infected, but it also cost multiple losses in the economic sector and in the stock market.

Impact of the Coronavirus Crisis Through Microeconomic and Macroeconomic Concepts

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus. This is a new virus that has been discovered in 2020 all around the world. During this virus has occur, there has been many economic impacts and has caused problems for example increase of unemployment and the banks reducing interest rates. Also, the main impact which is cause is the supply and demand. The essay will discuss the microeconomic and macroeconomic impacts.

Microeconomics

The first reason of why the economy has been affected is that the Prime Minister, Boris Johnson, has decided to make the country to go in lockdown which means the public should stay home and if they can work from home they should. Most individual firms have been closed because they don’t have any customers for them to run it. For example, a firm that has been affected majorly would be taxi firms as the public have been told to stay at home so there will be no customers travelling therefore this will leave the drivers to sit at home too. However, the grant would be worth 80% of self-employed workers’ profits up to a cap of £2,500 per month, which initially will be available for three months in one lump-sum payment. Also, because of small businesses have been shut down, the struggle companies and self-employed have been offered financial help by the government to help their business afloat and staff paid during the coronavirus outbreak. This will affect the government because they will be spending too much and will start being in debt.

Also, another major affect would be a change in supply and demand which causes the price to change. During this coronavirus outbreak, there has been a high demand in certain items for example toilet paper and hand sanitizer. In huge businesses such as Tesco, there has been a huge demand in those two items because the public need it. The supplier’s that private those two items have not been keeping up with the demand for those items so the supply has been less in those shops and which has led some shops to increase the prices because they know customers will need to pay for essentiality. The benefits for this would be business who provide hand sanitizers and toilet paper have been a huge profit because of the panic. There are more items that have been a very high demand such as essential foods like milk, bread, pasta and bread. The demand is so high that super markets have been putting restrictions on these items so everyone can have a chance to buy them as suppliers have not been supplying them.

There have been other businesses that have been affected negatively for example oil companies. The oil companies have taken a massive loss because the government have banned travelling to other countries and for people to go outside. Therefore, the public do not really need to use petrol because are not going. This is a problem for petrol stations because they are not getting customers. Another business affected will be airlines like Emirates, which travel with fewer people so flights are largely quiet and they don’t use oil. Due to demand being very low, oil companies have decided to put their prices very cheap and the oil stocks have been low to be bought. Also, due to the competitive market, the oil companies face to fight with prices to attract customers and stocks to be bought. The supply decreases and the prices increase. For example, in businesses, they did not have enough supply for the consumers so some business took advantage and they increased the price of their items as they know the consumers will pay anything for essentials items such as toilet paper and essential food items. This allows the business to charge premium price for their products. Also, manufactories worldwide are still working out how the virus will negatively impact their business and what the impacts will look like. For example, Automakers will be affected too and they make see a negative supply impact due to the reduced number of parts coming from China which was the main outbreak of Coronavirus. You can see everyone is really affected due to the low of supply and this can cause an impact to the economy because the government will be proving them grants to keep running the business. China is a huge source of components and goods and too many businesses depend on China and this is a huge impact because China limits their travel and consumption as China are being slow down or even postponing their production.

The demand shift decreases. This relates to this coronavirus outbreak because the demand in desirables decrease such as petrol. The consumers have been told to stay inside so they would not need to use any petrol in their cars or they are not taking any flights so the airline businesses do not need oil therefore the oil price is cheap.

Macroeconomics

During this corona virus outbreak, the economy has been damaged quite significantly around the world leading it going to recession. Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. This outbreak has caused the government deciding to take measures for the consumers. The government took measures that they have taken for example increasing their debt to cushion the economy. This part of the essay would be strictly about the macroeconomics concept of how the economy has been impacted.

First of all, the economy has been pretty damaged not because of the coronavirus but the measures the government have taken. For example, they have used the monetary policy which the banks cover and they have use the fiscal policy what the government do for their budget. The step that the banks have made to reduce the economic consequences is to reduce the interest rates. They have reduced interest rates for the consumers so borrowing would be easier. The Bank also pumped more money into the economy. The cut of interest rate will reduce the mortgage bill of homeowners and little will change for savers. This action by the bank will to help and protect businesses and homeowners for them to have extra cash to help them survive in this crisis. Also, the bank has took another measure such as to intervene in financial markets, put a lot of money in financial markets to make sure that they function properly and to make it easier for banks to lend into the real economy and reduced taken away some regulations like some rules again to make it easier for banks to lend. Lastly, another thin they have done is to go on a buying spree such as central banks have put plenty of money on the line to make sure they buy assets for example government bonds and corporate bonds again to make it easier for consumers to borrow. This has a negative impact for the government and the economy because they have increased the government debt for them to protect the economy from a deep shock. During this recession, the effects of unemployment would be high government and wasted resources as the high levels of unemployment just doesn’t affect the unemployed people but local economies, unemployed people contribute less to the economy because they are spending less and borrowing more. Another impact on the economy will be that the increase of poverty can increase as people are put out of jobs and people’s home may be taken away from them as cannot afford mortgages or afford to pay the bills or even if government grant will not be enough to cover their expenses depending on the number amount of people in a household. The impact of poverty can cause poor sanitation and this can cause the disease to spreads

There are some short-term impacts that the economy will have to suffer. There are likely to have negative effects on both the demand and supply side of the economy. Negative supply shocks could come as some workers have to self-isolate as they may have the symptoms of the virus or been tested positive. This coronavirus outbreak is mostly a negative supply shock that recuses growth and increases costs and inflation with some negative effects for aggregate demands. Furthermore, the government had to decide to pay self-employees or the workers who are out of their job to pay eight percent of their wages every month. The reason behind this is because they want help the pubic survive through the crisis. This gives puts the economy into a negative situation because the government will have pay this off and in addition to make this worse, the government have decided to pay wages of workers on leave and will be extended to October. Over the next few quarters, the impact of a severe recession is likely to be a disinflationary. Public health measures an aggregate demand as workers lose income if they do not work and opportunities to be disappeared and aggregate supply as business cannot and will not produce without workers and money.

Furthermore, this coronavirus outbreak represents the Keynesian economics. The Keynesian model is an economic theory of total spending in the economy and its effects on outputs and inflation. It was developed by the British economist John Maynard Keynes during the 1930 which was an attempt to understand the Great Depression. Keynes encouraged for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. This is similar to the coronavirus outbreak because the government have increased the expenditure as mentioned above for example using grants to support the public and reducing interest rates for the public to borrow more money. Keynesian macroeconomics argues that the solution to a recession is fiscal policy, such as tax cuts to stimulate consumption and investment increases in government spending that would shift the aggregate demand curve to the right.

Conclusion

In conclusion, at the microeconomic level the economy has been impacted because of the supply and demand. The losses of job have caused the public to not spend money on any desirables and they will need the essentials for them to survive. This has caused the demand to increase and therefore the supply to decrease. However, the government giving the public grants up to 80%, this will cause an increase of the country going into debt. The public finances will be significantly affected by the economic shock of the coronavirus outbreak. The Government’s budget deficit will increase as tax revenues fall and government spending increases. The initial disruption was to supply chains mainly from China, the beginning of the outbreak. As the outbreak spread around the world and into the UK, the public health measures to slow its progress which means that there will be fewer people working and individual firms to be shut down. Furthermore, to these supply shocks, there are shocks to demand in the economy. The public are being recommended not to leave their homes and with many businesses struggling to survive, unemployment will likely rise and the publics spending will likely fall.

At the macroeconomic level, the outbreak has caused a very deep recession due to the government increasing their expenditure and has left a pretty big hole. This will be hard to the government to come back to improve the economy as schools have been shit and non-essential businesses. This will be hard because if the non-essential business start running, the public will not really be interested as they have a low spending budget so some businesses have been damaged. Also, another reason businesses are not running is due to social distancing as some of the consumers do not have the patience so they will not buy any products. As the government continue to support businesses for them to keep them running and for families who have been put off their jobs due to this crisis, the longer the outbreak stands for, the more painful it gets for economy to recover from this recession as a very high employment rate will increase, falling average incomes and increase of inequality and a very high government borrowing which means a less tax revenue.

Essay on Poverty and Unemployment on the Case of India

During the first decade of independence, it believed that the economic growth of the nation would automatically reduce poverty and unemployment. But it realized that along with the growth the policies and programed need effective state intervention. In order to achieve the planned objectives, it needs to cooperate with various projects, including public-private partnership. In the present scenario it is important to give prominence for the quality of policies rather than giving emphasis to numbers and financial allocation. According to the Center for Economic Monitoring of India (CMIE), the unemployment rate in the country is still high at 24% as of May 17, 2020. Based on this report the unemployment rate in the urban area is high compared to the rural. The continuing uncertainty in present Covid-19 scenario will again worsen the situation. It needs a multi-dimensional approach and planning to tackle poverty and to generate employment.

The issue of poverty and employment generation is an important matter of concern since the independence. To attain the concept of sustainable economic growth of the country it should focus its intentions on eradication of poverty, malnutrition, unemployment, illiteracy and inequality. Since the industrial revolution poverty has reduced in developed countries. Depending on the context, there are several definitions on poverty. Basically, it is the inability to obtain basic needs which are necessary for the survival. It includes poor access to clean water, proper sanitation, education, health and other goods and services. In the case of India, according to NITI AYOG report, most of the states failed to crane poverty and the performance of 2019-2020 was bad compared to 2018. Also, poverty has increased in majority of the states. Despite variety of approaches, policies and programs in India, the issue seems to be a common feature of the states. On the other hand, government of India has implemented several programs and policies to tackle unemployment and poverty. One of the latest examples for that is make in India, an ambitious mission to generate employment in the county by inviting global companies to initiate their base in the county. According to the national manufacturing policy, by the year 2022 it will create additional 100 million employment. Presently poverty is a humanitarian issue which needs immediate measures. Another major central sponsored employment generation program with an aim to alleviate poverty is Mahatma Gandhi National Rural Employment Guarantee Scheme with an aim to increase the range of development of the poor. Rural development and employment generation is an area of study which need equitable growth and inclusive approach.

Due to the impact of Covid-19 on Indian economy led to demand depression and increase in unemployment. Especially in the unrecognized sector in which the employment generation range in this sector is falling down in an alarming rate. According to the United Nations Development Program, before 2050 India have to create 28 crore jobs to rivet all the new job seekers into the work force. Due to the containment measures the current pandemic can push 40 crore informal sector workers into poverty.

In India Government spending will have direct and indirect impact on poverty. The direct effects include the benefit received by the poor from welfare employment program like integrated rural development program (IRDP) and such other schemes. Indirect effects include the investments of the government in agriculture, health and education sector of the rural people and rural infrastructure can lead to employment and income earning opportunities can generate quality of life. This article is giving emphasis on the critical analysis of various programs and schemes of the government which gave it prominence for eradication of poverty and unemployment through employment generation programs.

To transform the nation to a well-developed one the uncertainty which is prevailing in the economy should be dealt with certain methods which can provide sustainable prosperity. The major issue is unequal distribution of wealth which has created millions of people poor. According to the study conducted by UK based Charity in 2015, India’s richest 1% hold about 58%of the total wealth of the nation. Also, a large number of work force in informal sector works for low wage again increases the gap. There are several programs of the government such as Integrated Rural Development Program (IRDP), Public Distribution System (PDS), Mid-Meal Scheme (MDMS), National Family Benefit Scheme (NFBS), National Old Age Pension Scheme (NOAPS), Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), Pradhan Mandri Jan Dhan Yojana (PMJDY) and Pradhan Mantra Grameen Avaas Yojana, which addresses the needs of the poor by policy. Most of the rural poverty alleviation programs seeks to access employment, food and such other basic needs. The program of Prime Ministers Employment Generation Program creates self-employment ventures in the rural as well as urban areas can help the traditional as well as prospective artisans and unemployed youth. By encouraging the private sector of the county, and also to increase the public expenditure program such as Prime Minister’s Employment Generation Program (PMEGP) and Pradan Mandri Kaushal Vikas Yojana under Skill India mission are generating employment for the rural poor. On the other hand, following the outbreak of Covid-19 in India the economic strata of the nation witnessed disruption. To manage the crisis government has announced relief package to help the poor, but the initiative has failed to provide financial assistance to the unemployed migrant workers and daily wage labors who have been hit hard by the pandemic. According to V. Sivakumar, General Secretary of the Construction Workers Federation of India (CWFI) in total there are 6 crore construction workers in the country and among them only 3.5 crore were registered under welfare board, so the rest will be ignored by this policy which will sink them to poverty. On the other side sue to the increasing central – state political rivalry the scheme of PM kisan have been prevented spreading nationwide, in that case no farmers of that state will receive the assistance. Experts argued that most of the announced package may not reach all poor and the issue of poverty will be continued. Till the end of the pandemic.

Even after the post-coronavirus era, the nation has to give farsighted and long-term measures to tackle poverty and unemployment.

Competition Authorities and Their Role in Price Control in the UK

The coronavirus pandemic is the first time that all economies across the world have faced such a severe global challenge since the recovery from World War II, and it would be fair to say that the UK have been among the worst affected. In this report, I will investigate how the UK Competitions and Markets Authority (CMA) have adapted to price rises in the economy, how they should ensure a strong recovery in the future, and then conclude whether it is worth intervening in the UK market.

First, it must be noted that the CMA is not an institution built to respond to a crisis; legally mandated deadlines are worked on and completed over months and years after extensive research. However, in March they set up a taskforce to act on firms breaching competition or consumer protection law and advise the Government on emergency legislation. This was because the CMA had to deal with the price gouging (when a seller increases the price of goods to a level much higher than is considered reasonable or fair) of essential items such as medicine, hand sanitizer and food. Due to Covid-19, the demand for these goods became more inelastic (insensitive to changes in price) and consumers were willing to pay even more for them. For example, the median price of hand sanitizer rose by 400%. As a result, the CMA received 15000 complaints from mid-March to mid-November in 2020 over price rises.

This has forced the competition and market authorities to become more innovative and has led them to adopt four new ways of acting:

1. During 2020, an unprecedented 97 warning letters were issued to sellers regarding unreasonable price increases.
2. Regularly updated consumers on the steps their taskforce had taken to deal with complaints.
3. Initiated consumer enforcement investigations in a range of sectors, at speed, in industries such as travel indicating a large level of disservice.
4. Gave out public guidance aimed at advising businesses to do the right thing regarding cooperation with competitors.

Whilst the CMA did not technically intervene in the market, their actions caused firms to become wary of price gouging, and consumers to become more well-informed and therefore, more confident in a post-Covid market.

Even before the pandemic, market concentration had been rising in most industries throughout the UK. From 2004-2016, the top five companies share of revenue in all industries rose by 3.8%. If no action is taken, market concentration will continue to rise as larger companies can either bully smaller firms into bankruptcy with their greater resources; or acquire (killer acquisition) them at a cheap price instead. In a business climate where small companies are at a high risk of bankruptcy, due to a lack of funds, the opportunity for huge corporations to exercise their power is much greater. This would create oligopolies (the top 5 firms dominating over 50% of the market) in even more industries than before.

As competition falls, the remaining firms in the market are able to earn abnormal profits, by selling at point (Po) instead of the market equilibrium (Mo); as a result, consumers pay more for their goods. Potential competitors are deterred from entering the industry due to the strong brands of remaining companies, and because of the economies of scale (savings in cost from an increase in production) being exploited.

Regulating these industries in a post-Covid market may prove to be a tough challenge for the CMA as the institution must face multiple trade-offs. Whilst the Competitions Authority should look to bailout bankrupt firms in more concentrated industries. If the company is fundamentally insolvent (unable to pay debts owed), the CMA will be wasting scarce government resources on a firm destined to fail. Moreover, the CMA must thoroughly evaluate all mergers and killer-acquisitions to effectively determine whether letting the merger go through will limit competition, or if it will let a company benefit from the synergies of an insolvent firm. For instance, in May 2020, the CMA prohibited the merger of JD Sports and Footasylum after finding that consumers of sports-inspired clothing and footwear would be worse off as a result of the merger. I believe that it is imperative for the CMA to find the balance between granting aid to profitable firms on the brink of bankruptcy to promote competition, whilst also allowing larger firms to merge when the increase in synergies outweigh the loss of competitiveness in the market. If this can be achieved, real prices (adjusted for inflation) will only rise slightly as some firms will become more efficient and competition will continue to exist.

The WTO predicted a fall in international trade between 13-32% at the start of April. Although a fall in imports can increase net trade (exports-imports), when exports have also fallen at a similar rate. It creates a large problem for the CMA. Many of the reasons for the decline in world trade were due to helping stop the spread of Covid-19. However, in a country isolating itself from the rest of the world before coronavirus, consumers are even more likely to adopt protectionist beliefs after the crisis recedes. As a result, consumers will irrationally prioritize goods in the UK over cheaper goods elsewhere, leading to a decline in external competitive pressure on the domestic industry. This is another potential factor which can cause a fall in competition and therefore an increase in prices.

To negate the impacts from a fall in trade as much as possible, the competitions authority could advise the government to implement free-market supply-side policies such as deregulating markets and removing barriers to entry. For example, in 2020 the government cut the democratic input into the planning process of housing by half. This increases competition in this specific market as it reduces the time needed to gain approval for a construction project, therefore incentivizing potential competitors to enter an industry where profit can be generated more quickly. Nonetheless, I would not justify this intervention as deregulation can lead to a decline in the quality of goods and services. In this instance, it is the government’s job to negotiate trade agreements or to try and remove trade barriers to increase competitiveness in the UK market. For example, the Department for International Trade removed 175 trade barriers in fiscal year 2019-20, resulting in a potential additional increase of £75bn a year in UK exports.

In this report, I have explained the challenges the CMA have faced during the pandemic and predicted how they will handle the issues which may cause prices to rise in a post-Covid market. Although the competition authorities could have used other methods of limiting price, such as price ceilings, the opportunity cost of regulating such a broad cap on prices would outweigh its benefits. Instead, urging firms not to charge excessive prices and acting efficiently upon buyers’ complaints forced down the price of goods such as hand sanitizer more simply, dealing with the immediate issue. Price controls on essential goods should only be used as a last resort and have not been needed in the UK since the 1960s.

To conclude, I believe the most important dilemma the CMA currently faces is trying to limit competition, thus preventing a rise in the price of goods throughout several industries. As I said previously, the best way to go about this is for the CMA to distinguish between mergers that limit competition and acquisitions which promote an increase in synergies. Furthermore, the CMA must work closely with the government to ensure measures are taken to increase international competition by encouraging free trade, consequently keeping price increases low.

Coronavirus Impact on Indian Economy

Coronavirus disease 2019 (COVID-19) is an infectious disease caused by severe acute respiratory syndrome (SARS-CoV-2). It was first identified in December 2019 in Wuhan, China, and has since spread globally, resulting in an ongoing pandemic. As of 25th may 2020 around 5.4 million people are infected around 2.17 million people have recovered and the disease had caused around 3,45,000 deaths. Common symptoms include fever, cough, fatigue, shortness of breath, and loss of smell and taste. The time from exposure to onset of symptoms is typically around five days but may range from two to fourteen days. Recommended measures to prevent infection include frequent hand washing, maintaining physical distance from others (especially from those with symptoms), quarantine (especially for those with symptoms), covering coughs, and keeping unwashed hands away from the face.

Across the globe most of the countries have closed down all their economies. People are asked to do work from home. The essential activities are the only businesses which are open across the globe. In India the unemployment has rose from 8.75% to 24.57% till date. The stock exchanges across the globe have had a hit among which China had the least movement of 3% downwards and India saw the highest fall of around 25%. As the Indian markets are the highest hit due to the Coronavirus pandemic, in this essay I’m going to analyze the economical impact based on different sectors, such as: primary sector, secondary sector and tertiary sector.

Primary Sector

The agriculture which accounts to 16% of GDP of India is affected due to the logistical problems. The migrant labors who account for most of the 31% of workforce in India are moving back to their own states. This is causing a huge shortage of labour and problem in the agricultural sector in India. The fertilizers which are necessary for agricultural industry is facing a shortage due to non availability of raw materials to make fertilisers as there is a ban on exports.

The tea estates in India are another worst affected industry. Since it is a labor-intensive industry there is a huge shortage of labor. The Darjeeling Tea Estate which is one of the largest exporters of tea expects a drop in revenue and expects tea sales to go down by 8% across India. While the dairy industry was functioning during the lockdown, the basic feed needed by the cows was not available due to transport issues, which were heavily criticized.

The energy sector which is another important sector sees a huge fall in consumption of energy due to the Covid-19 pandemic. The LPG consumption has risen by around 12% due to non-availability of restaurant chains across country due to lockdown. An international agency has predicted that India’s diesel consumption would reduce by 6% and annual fuel consumption by 5.6%.

The fishery industry is affected as the pandemic has hit during the non-fishing period in some parts of India which has added to their worries. The main problem for fishery industry has also been the movement/transportation.

So, summing up, the main problems faced by the primary sectors are: transportation, availability of raw materials and labors.

Secondary Sector

The secondary sector generally includes those industries which produce a finished usable product or that are involved in construction. The sector generally takes input from the primary sector and produces the output for export or sale to domestic customers. The sector is generally divided into light industry and heavy industry.

The major automobile industries such as Maruthi, Toyota, Tata, and Mahindra have all closed down their operations and plants or are functioning only with minimum employees. As a result, the factory output has reduced. Due to the pandemic the economic demand is also very less in this industry. The major problem faced by this industry is problems in supply chain management. According to a research by GlobeNewswire a leading journal the global automobile industry will see a 12-15% dip in their overall sales and revenue.

The Fast-Moving Consumer Goods (FMCG) segment is also another sector which is affected by the pandemic due to lack of transportation. The local Kirana shops were more benefited due to the lockdown as all small shops were able to make revenue out of the lockdown. The local brands and manufacturers increased their productions in order to meet for the demand in India.

The major mobile brands like iPhone have stopped their manufacturing plants across India.

Telecommunication industry has seen a rise in number of subscribers as well as heavy traffic due to the lockdown. The increase need of telecommunication is due to more people asked to work from home and more use of OTT platforms as more people are staying in home.

So, the major problems of the secondary sector are: the disruption of supply chain, reduced consumer activity and lack of logistics.

Tertiary Sector

The tertiary sector is the sector of the economy which is concerned with the services in the economy. In India due to the pandemic most of the service industries are affected. Tourism is one of the major service sector industries of a country. In India tourism contributes to around 9.2%. Many people are unemployed due to lack of tourists and travel ban during the pandemic. The income or revenue from tourism industry is nil during the pandemic.

The transportation industry has also been affected due to the pandemic. The logistical movement is difficult due to rigorous checking happening between cities which makes transportation difficult. Adding to the woes no public transport is available for people to use.

The information technology sector is least affected sector among the other sectors as most of the companies have asked their employees to work from home. The impact in this sector is comparatively less.

Indian aviation sector could be said as one of the worse affected sectors as all the aviation companies were asked to shut their services due to the nationwide lockdown caused by the pandemic. Aviation sector has started to resume from 24th may with only domestic travel permitted. The aviation companies were asked to pay their dues. It seems that most of the companies would do huge sacking of employees as they are running out of cash and may even turn out to become bankrupt. The aviation sector is the most affected sector as many wouldn’t prefer to travel after the pandemic as it spreads mostly during travel.

Hospitality industry is another industry which isn’t functioning due to the pandemic. Experts say that the turnout of customers might take some time. It takes some months for tourism industry to begin which is important for hospitality industry to function.

Conclusion

The Indian government has introduced an economic relief package worth 20 Lakh crore which is about 10% of GDP by Prime Minister. The economic package is aimed at bringing relief to various sectors and stressed businesses. The Indian Government is trying to attract the firms which are about to shift their production units out of china. The government is making reforms to pull the firms into India. The better part is unlike the other governments India isn’t printing any currency notes, only 3.2 lakh crores government has spent from its treasury which is only 1.4% of GDP remaining amount is contributed other various lending houses.

In my perception I think the economy would see U shaped curve. Mostly there could be a stage of recession which would then go on to recovery and then a boom stage. This business cycle may take some few years or many years. Many agencies have predicted the GDP of India post-Covid-19, like: SN Agency Estimate Bernstein -7%; ICRA -5%; Goldman Sachs -5%; Nomura -5%; SBI -4.70%; CARE Rating -1.5%-1.6%.

So, everyone predict that our economy would face a downfall but even when Bhuj earthquake struck Gujrat in 2001, it was devastated. Everyone predicted the same that it would take long time for its recovery. During that time the GDP of gujrat it was at 6th place but within a short span of time it recovered and now it is at 3rd place. This could be taken as an example and can be done all over India.

The Covid-19 Pandemic and Its Potential Negative Effects on Greece, ‘Weakened’ by the Debt Crisis and Strong Migration Waves

Greece’s international reputation took a battering during the European debt crisis that dominated the first half of the last decade. The country was widely perceived as irresponsible, corrupt and inefficient. The country’s financial situation was sound when it entered the EU in the early 1980s, but it deteriorated substantially over the following next thirty years. While the economy boomed from 2001 to 2008, high spending and mounting debt loads accompanied the growth. The end of 2009 and 2010 marked the beginning of Greece deep financial crisis following the Prime Minister’s revelation of the real amounts of the public debt and deficit of the Greek state. Consequently, the Greek government announced and imposed capital control systems where bank withdrawals, overseas transfers and foreign exchange transactions were restricted as part of austerity measures.

On the migratory front, Greece’s immigrant population, including aliens and co-ethnic returnees such as Pontic Greeks and ethnic Greek Albanians, reaches just over one million people. This represents about 9% of the total resident population, a strikingly high percentage for a country that until only twenty years ago was a migration sender rather than host.

In the last decades of the 20th century, Greece was transformed from a traditional migrant-sending country to a migrant-receiving country. At the same time, inflows of unauthorized migrants continued, despite deterioration of the Greek labor market, with countries of Asia and Africa emerging as important source countries. While unauthorized inflows were of course not a new phenomenon for Greece, due to high unemployment levels a large proportion of these inflows could not be incorporated into wage labor in the informal sector of the economy, as was the case previously during Greece’s ‘boom’ years.

At the short of liquidity, the Greek state found itself obliged to request financial assistance from the European Commission (EC). This is how the euro area officials were drawn up, jointly with the International Monetary Fund (IMF) and European Central Bank (ECB), the MoU agreements which include all the economic conditionalities to the granting of financial loans. The objective of these structural adjustment programs, developed between 2010 and 2015, was to impose deep reforms of Greek public policies in order to reach the budgetary standards in force not only in the European field but also vis-à-vis lending markets. However, the public debt has steadily increased since then, and the overall Greek socio-economic situation has deteriorated considerably. Yet the Troika has continued to deepen the prescribed measures, arguing that only these reform plans could lift Greece out of its critical economic situation, provided that Greek society assumes the necessary efforts.

On reading the Memoranda, it appears that these efforts are mainly structural measures to liberalize the economy, privatize goods public spending, reduction of public spending and ‘wage and non-wage production costs’ or even more flexible labor market. The cumulative circle fundamental to process of high-interest repayment of loans and public debt, which does not that generate new loan needs, as does the failure of measures to generate new economic growth, lead to question the formal explanations on which creditors rely to justify their policy choices economy destined for Greece. As a result, numerous of economic impacts negatively in Greece such; the drastic rise in the employment rate and rapid labor deterioration as shown by the increase of precarious and uninsured work, insecurity, degrading payments, weakening of labor rights, and deregulation of labor agreements. Hence, the migration of younger, highly educated people has risen ‘brain drain’, while those studying and living abroad are discouraged to return to Greece, and those who previously would have stayed, are now leaving. According to the World Bank’s statistics in 2014 Greece unemployment rate was 17.24%, a 2.05% decline from 2018 and the index for ‘anchored’ poverty rose more dramatically than the index for relative poverty.

Besides, the austerity measures contributed significantly to an increase in suicide cases in Greece which increased by 25 percent from 2009 to 2010 and by an additional by over 35 percent from 2010 to 2011. Furthermore, a dire deterioration of public health evidenced by reduced access to health care services exacerbated socio-economic crisis. There was also a decline in the health expenditures by up to 41%. Resultantly, drug prevention centers and psychiatric clinics closed down due to these budget cuts.

The industrial deterioration is also one of the main sectors that have been negatively impacted during this crisis. However, Greece is currently forced to follow other eurozone bond markets and eurozone financial institutions. Debt crisis in one-member country of the eurozone might trigger a more general crisis involving other eurozone countries perceived to be ‘fragile’ and have similar budgetary problems (like Spain, Ireland, Portugal). It is important to underline the aggression of Greece, Cyprus, and Turkey conflict over rights to drill for natural gas and how the EU could play a constructive role by helping the three parties declare a moratorium on exploration and switch their focus to renewable energies.

Despite the universality and naturalness of values and norms the socio-economic systems integrated into national and international systems, particularly within the European project, thus we faced with a real political project, operating through the strategies maintaining the conditions of social consensus under which a system socially constructed, politically integrated and intellectually supported global hegemonic the ability to become the new common sense, universally legitimized and consensual accepted, using a transnational historical bloc – made up of political elites, institutional, financial, economic and intellectual institutions, and sharing the same system of distinguishes his interest in the perpetuation of such an order. As such, the process of one market regulation has been accomplished by condemning the Greek state to long-term financial instability, the financial system disqualified from the outset a political alternative or an economic deviation from its demands, while serving the interests of the hegemonic class.

At this point, it is highly important to shed the light on the ideological part of the institutional discourse of the Troika in the management of the Greek crisis, as well as on the socio-political issues that govern this long lasting-crisis. Due to the absence of strategical constructive contingency plans and the sever corruption of Greek government and people in power to endure the debt crisis; multiple implications led to political discourse and many factors had also contributed to exacerbate the crisis and created a long-lasting social impacts and unrest starting from the division in the political and fiscal leadership that led for a massive demonstration to reform the national policies which rise of populist parties SYRIZA and the far-right Golden Dawn. For this, the new SYRIZA presented within their capacity as elected party on an ‘anti-austerity’ platform proposal for an alternative debt management regime to an emergency meeting of eurozone finance ministers in Brussels.

Strengthening the rule of law and ramping up efforts to fight corruption Greece suffers from high levels of perceived corruption. The ongoing fight against corruption and economic crimes is key to improving the business environment and the functioning of the public administration. In 2019, the National Transparency Authority (NTA) was formed to fight corruption. This initiative is yielding fruit and Greece’s scoring in the control of corruption has improved. Constitutional changes passed in late 2019 have streamlined immunity-waiver procedures for ministers and members of parliament.

Furthermore, the heavy migration wave put a further strain on the crisis. Due to the geographical location and the changes of Greece’s economy after joining EU, low-income job seeking immigrants trekked in. The unstable political situation in Eastern Europe, Middle East and African countries was the biggest pusher of the flow of immigrants to Greece. According to OCDE, Greece champions the EU in unemployment rates among migrants (around 25%). It’s important to note that Greece didn’t receive consistent support to manage this new wave of migrants. Unfortunately, it was accused of pushing back migrants and asylum-seekers. For this, in 2019, Kyriakos Mitsotakis, the prime minister of Greece, announced what he termed ‘strict but fair’ reforms to Greece’s migration policies. The Aegean Islands, facing a massive influx of asylum seekers, disrupted tourism and international trade. Moreover, the closing of neighboring countries borders encouraged refugees settled in Greece. On the other side, Turkey opened its borders for migrants intending to travel to certain EU countries through Greece as a pressuring tool or approach to get more support for a resettlement plan centered on northern Syria.

After the 2008 crisis, the Greek economy initiated its recovery in 2017, bouncing back in 2018 with a 1.9% growth rate that was estimated to reach up to 2.3% by 2019. Unemployment edged down from 27.5% in 2013 to around 17.3% in 2019. While Greece has contained the Covid-19 pandemic effectively, the negative impact on tourism, investment and public finances is a setback to Greece’s longer-term recovery. The impact of the Covid-19 pandemic on the tourism sector is unprecedented. Tourism has been hard hit, especially in places where the sector supports many jobs and businesses. OECD estimates on the Covid-19 impact point to a 60% decline in international tourism – if recovery starts in July in 2020. This could rise to 75% if recovery is delayed to September and up to 80% if recovery begins in December 2020. Domestic tourism will recoup more quickly but will not be able to fully compensate for the decline in international tourism.

At present, the Covid-19 pandemic isn’t just a health problem. Its global impact on social, economic, academic, political and human welfare is unprecedented. The government-imposed confinement measures on all the accommodation facilities for asylum-seekers in Greece as measure of preventing the emergence and spread of Covid-19 cases. As in other countries, containment measures, travel restrictions, social distancing and high uncertainty have led to a temporary but extraordinary drop in production and large loss of tourism demand and employment. The government has responded with substantial packages to strengthen the health system, buttress incomes and liquidity, and support and restart sectors most affected by the shock, such as tourism.

By analyzing all the forementioned factors, the possibility of ‘Grexit’ becomes more real as there is no hope of Greece’s recovering from the recession impacting on overseas investment and tourism from other European countries. On the other hand, given the current situation and the conflict between Turkey and Greece it may not be the best time to withdraw itself from the EU since it’s the only entity protecting it from absolute tragedy. Yet despite governmental and community support, crisis fatigue has set in and Greek residents seek the return to normality and resumption of tourism that remains the islands’ economic lifeline. Moreover, Greece is still struggling to recover from its decade-long economic crisis, although some hopeful signs are appearing on the horizon. A new government elected in July 2019, the New Democracy party, has promised to usher in major economic, political, and social reforms that have been received favorably by the international community and foreign markets.

The Covid-19 crisis renews the urgency for Greece to undertake ambitious structural reforms to resume and reinvigorate the country’s recovery, raise economic growth and well-being, and ensure current and future generations enjoy a high-quality environment. The great financial crisis jolted Greece’s politics and changed its political economy and society in ways which, along with ongoing political stability, may help sustain the reform momentum. Successful reform implementation will depend on challenging vested interests and overcoming resistance to changes in the public administration.

A complicating and worrying factor is how much the country’s biggest revenue engine tourism will suffer as far fewer people that hoped for came this summer after the borders were opened to many countries beginning in July, people still Covid-19 shy and afraid to travel. The tourist sector is seen shrinking 10.5% after many hotels didn’t even try to open because of restrictive and expensive health protocols that would have been required and few to no bookings.

In conclusion, Greece continues to face the challenges of diversifying its economy and improving productivity as it did during the crisis. Emerging sectors, such as food processing, logistics, which include transportation and supply chain coordination, and investments in innovation clusters, are potential assets. But Greece needs to undertake institutional reforms, adapt the job market, finance digital infrastructure and adapt to the realities of heavy migration waves.

References

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Is Covid-19 the Last Nail in the Coffin of the Free Trade?

Defining Globalization to Know Free Trade

Globalization refers to the gradual process of intermingling and increasing interdependence among economies of the world. It refers to the integration of world markets with the domestic economies that allows for free movement of goods, capital and services across nations. Globalization is a major reason behind the emergence of free trade era.

Emergence of Free Trade

With the advent of neo-Classical theories of economics in the 1970s and 1980s, free trade became the notion of overall development for the world market. The theories explained the comparative advantages of trade and benefits of specialization in reaching the potential levels of production and higher levels of consumption. Most of the countries carried out market reforms and opened up their economies for foreign competitors. This led to the emergence of an era of globalization and free trade flourished. Even at its Zenith, the mechanism faced several criticisms ranging from how globalization has:

• Rendered uncompetitive domestic Industries, industrialist and workers helpless;
• Has put national security in danger;
• Has increased money laundering and other frauds;
• Has led to excessive exploitation of natural resources; to
• How the mechanism overweighs and destroys government’s and citizens’ authority over their own country.

Then Came the Financial Crisis (2007-2008)

Contrary to the concept of globalization, the world we live in, is continuously moving towards De-Globalization, laying down the coffin of free trade step by step. The concepts of globalization, free trade and deglobalization necessarily depend on fiscal and monetary policies of a government and therefore can’t be studied in absenteeism of the political ideologies of the country. The concepts are henceforth, components of political economics and underestimating the role of politics may lead us to erroneous conclusions. The collapse of housing bubble (US), due to depreciation of subprime mortgage market resulted in collapse of Lehman Brothers, that provided financial services across globe, which gave this century the first major financial crisis. Supply chains were disrupted and the repercussions of the crisis are felt today in the form of the worldwide recession. This financial shock came at the time when capitalism dominated the world economy. Amidst economic shocks of very high unemployment, low production, high poverty and high vulnerability, right-wing ideologies gained immense popularity. The right took up the cause to protect the economic and political system, blaming globalization for the adversities. Immigration was replaced by nativist and racist sentiments and free trade by protectionism and nationalist sentiments. The goals of these nationalist leaders were protection and development of the domestic industries, employment of their people, attainment of favorable balance of trade and diversifying their production to make the country self-reliant. Rise of nationalism gave way to several refugee crises. Many communities were tortured, slaughtered and forced to leave their homelands. No other country let them in fearing the insecurities of their citizens and over exploitation of their resources. The migrants had no choice but to illegally cross borders and take up jobs to earn their living, for example, the Rohingya Muslim Crisis, South Sudanese, Libyan Crisis etc. Barriers to free movement of goods, services and people became a common phenomenon and price gaps in different countries increased. Consumers had no choice but to buy the limited and expensive goods.

A Hope?

China emerged as a global leader in increasing connectivity in the post-crisis period by its Border and Road Initiative. Physical and digital connectivity have become important and easy because of technical developments and air transport. Tourism as an industry sophisticated and many economies like that of Thailand are entirely dependent on tourism. Even while improving connectivity government have taken greater control of the market, with their policies often acting as bargaining counter to bring benefits to their citizens.

Some Recent Developments

The current US trade policy called ‘Americanism’ by the President Donald Trump, clearly hints this use of fiscal policy as a bargain to extract benefits from other countries. The policy, ‘Bilateralism and No Multilateralism’, claims that a large country like US gains from restrictions and relaxations in trade. The US leaving the UNESCO and UNHRC in 2017 and 2018, can be considered the first steps towards the end of international cooperation. What we are witnessing between the US and China, the trade war, reflects perfectly how the markets have fallen prey to the government policies and their vote bank politics. US continually raised tariffs on Chinese goods and services blaming China of dumping and stealing foreign technologies.

China opened up its market step wise by introducing reforms in the agriculture sector and then in the industrial sector. It soon became one of the major exporters of world having favorable balance of trade with almost all countries. In 2001 China joined the World Trade Organization and is projected to become the economic superpower by overtaking the American economy by 2030 (‘The Economic Times’).

The United States blame China of violating WTO rules and regulations. China provides better market access, tax breaks and free land to its companies, which disturbs the level playing field in the world. It also gives differential treatment to companies with the aim to sell goods at cheaper price in the world market than in the Chinese market itself. This is called ‘dumping’.

China repeatedly retaliated the US restrictions by levying taxes on US goods. The Chinese tariffs affect the region of US which is the major voter base for the President. The US has put restrictions on Chinese technical industries. This trade war has caused financial losses to the world. Similar trade war was seen between Japan and South Korea.

Brexit

Then turned out another major event of our times, Brexit (the exit of Britain from the EU). Europe has, since long been united under the banner of European Union having common currency, foreign policies and judicial system. Trade restrictions were negligible. The Brexit deal on how trade relations would be continued between the EU countries and Britain in the post-Brexit scenario is yet to come. The US left UNESCO and UNHRC in 2017 and 2018 respectively and has raised proposals to leave the UN itself. This trend of localization of ideas, ideologies and products reflected by superpowers abandoning the international organizations indicates the end of international cooperation and eventually the fall of free trade.

And Here Comes 2020

2020 has been the most dramatic year so far. It came with the possibilities of World War III, protests in Hong Kong, India, US, Mexico etc. and halted the world with the deadly and brand-new coronavirus. The world economy has been literally paralyzed with supply chain disruptions, low aggregate demand and immense fall in exports and imports. As events are turning out, we can surely say that coronavirus is the last nail in the coffin of already deteriorating free trade at least temporarily, with every country worsening its trade relations with China. Coronavirus is a global problem that does not recognize the borders of countries whereas the governments do and are working proactively to protect their nations, citizens and economies. Exports and imports have been banned to stop the transmission of the disease. Entry of foreign tourists, students and labor has been banned for the time being. Governments are trying to protect their Industries under the lockdown period. For instance, Press Note 3 and Press Note 4 have been released in India to amend the FDI policy. The amendment aims to prevent opportunistic takeovers/acquisitions of vulnerable Industries by foreign investors especially China. Now, every foreign investment from the countries that share borders with India would come via the Government route. It also seeks to prevent formation of monopolies that would lead to inefficient allocation as well would make the stability in the country unshielded. With elections due in the US, Trump’s natural instinct would be further protectionism in the form of tariffs, investment restrictions, export ban, import substitution etc. While all these measures are necessary till the disease vanishes or a vaccine is developed, the international organizations must be ready with certain plans, policies, rules and regulations to recover the loss of trade in the post-pandemic times.

Indicators and Conclusion

The KOF Index of Globalization, measures political, economic and social dimensions of globalization. The latest trend of this index shows the flattening growth of globalization since 2015. According to the CPB World Trade Monitor world trade decreased at 1.4% in January 2020, while decreased at 1.5% in February 2020. The World Trade Organization must formulate incentives, rules and regulations that can accommodate the needs of the multipolar world and not only the future superpower. This independency of WTO is important to prevent the countries from exercising individual protectionist policies. If the trade organizations fail, we might see a situation similar to that during the Great Depression of 1930s.