World’s Economy at the Height of Covid-19 Pandemic
Covid-19 pandemic has affected the world’s economy in 3 different ways.
- Directly impacting the production
- Creating market and supply chain disruption and;
- Financially affecting companies and financial markets
As of this writing, not much is known about the virus. While public health officials are still trying to figure out the medical impact of the virus together with certain key elements similar to incubation period, we know that the economic impact will rely on how the general public would react to the virus. Public reaction might allow the disease to spread far and wide or it may create unnecessary costs.
Economic Impact of Covid-19
Chinese production had been massively impacted after the Hubei province and other nearby areas were shutdown. Some other countries are beginning to feel its effect as relative authorities are putting them into lockdown as well to prevent the spread of the virus.
Countless of manufacturing companies are heavily relying on imported products from China and several other countries that were affected by the virus. As a matter of fact, many of these companies are relying as well on China in meeting financial goals. With the unimpeded slowdown of the world’s economy as well as transportation restriction, affected countries will definitely be impacted on the level of their production and thus, profitability.
As for those companies that depend on intermediate goods from affected regions and not easily capable of switching sourcing, the severity of impact might depend on how fast the government will react to stop the outbreak. Both small and medium sized businesses might face more difficulties in surviving the disruption that Covid-19 caused. Businesses that are associated to travel and tourism are facing significant losses and most likely not be able to recover that fast.
Keeping Trust in Financial Markets?
The temporary disruption of production and/or inputs can cause additional stress on companies, especially to those that have inadequate liquidity. Traders who are using mt4 indicators and others tools might not be able to predict or anticipate which firms may be susceptible. The increasing rise in risk may show that one or several key players in the financial market have bought investment positions that will not yield any profits under current situations, which further weakens the trust in financial market and other financial instruments.
Another possibility is the huge decline in equity markets and also, corporate bond markets with investors prefer to hold on to government securities due to the uncertainty brought by Covid-19.
