In their Numbers: How Coronavirus is Hurting the Global Economy

  • The last time oil price was at a low of between $20 and $26 per barrel was in 2003.
  • Bloomberg reports that the last time factories were shut down up to the level they are shut in the last two months, was during the Second World War. That is, biggest factory shut down since WWII hits the United States and Europe.
  • No thanks to COVID-19, the longest bull market in the US ended on March 11 when the DOW dropped over 1,400 points in a day.

Coronavirus (COVID-19) Cases in Numbers

From total infection of less than 1000, coronavirus is now present in more than 112 countries of the world and has infected more than 248,000 individuals all over the world at a mortality rate of about 4% while more than 88,000 have recovered as at 19th March 2020. In terms of demographics, a total number of 183 countries in 6 continents have been affected. In terms of active cases, Italy has the highest number of active cases at 33,190 as at March 19 followed by Spain which recorded 17,390 active cases as at the time of writing this report. An active case is defined as the total number of cases less total number of recovered cases less total number of deaths.

However, in terms of total confirmed cases, China comes first at about 81,000 confirmed cases followed by Italy which has more than 41,000 total confirmed cases and Spain which has 19,980 confirmed cases as at the time of writing this report. In terms of continent, Europe has been the worst hit so far as the total confirmed cases as at 19th March, more than 114,000 cases have been confirmed. Italy, Spain, Germany and France are the worst hit region.

Based on the number of deaths, more than 10,000 citizens of the world have died as a result of the pandemic with Italy recording the highest number of death followed by China, Iran, Spain and France as at the time of writing this report.

Related: Impact of Coronavirus on the Nigerian Economy

A total number of 942 cases have been confirmed in Africa as at the time of writing this report. Egypt has the highest number of confirmed cases of 256 followed by South Africa with 202 confirmed cases as at the time of writing this report. Ten deaths have been recorded in Algeria, seven deaths in Egypt while 3 have died from the pandemic in Morocco.

Impact on the Global Economy

There is no doubt that the pandemic has sharply reduced economic activities, as different countries of the world continue to shut down their borders in order to serve as a measure of containing the virus. This has led activities across the supply side to be halted while demand continue to increase due to impulsive buying as well as speculations. In some situations, demand has also fell especially in the aviation, hospitality, tourism, manufacturing and transport sectors as well as in the market for raw materials to be used for the production of goods and services.

Source: UNCTAD

As at 9th March, UNCTAD still believes the world GDP growth in 2020 will be in a positive territory (Bear side of 0.5%). However, the Pandemic will cost the world around $2 trillion which is about 1.5% of the World’s GDP.

Data obtained from the IMF shows that growth in real industrial production in China declined significantly from 5% in September 2019, to -15% between January and February 2020. For the growth in nominal retail sales, it declined significantly from about 7% growth in September 2019 to 20% between January and February 2020. This shows how COVID-19 has significantly affected industrial production as well as retail sales in the second largest economy of the world. The February 2020 Purchasing Managers’ Index (PMI) of China also showed that the manufacturing and service sector contracted in February (35.7) when compared to January’s PMI of 50.0. Going by all indications, the expected slow-down China in the first quarter of 2020 will be significant and will leave a deep mark for the year. According to the IMF, the coronavirus shock is severe even compared to the Great Financial Crisis in 2007-08, as it hit households, businesses, financial institutions, and markets all at the same time-first in China and now globally.

Italy is the most severely affected among the European countries, both in terms of cases and in terms of death. With the rate of increase in the number of cases and death in Italy, its GDP are now running between 10% and 15% below normal levels. As such, contraction in Italy’s GDP is expect to happen in both the first and second quarters. This will make Italy to be in recession in 2020.

According to the biggest bank in the United States- JP Morgan, China’s economy is expected to shrink by 40% in the first quarter of 2020 when compared to the previous quarter and this will represent the biggest contraction recorded by the country since 1970. This is expected to reflect across the Asian continent.

As daily economic activities continue to grind to standstill, JP Moran believes that the United States GDP will fall sharply by 14% YoY in the second quarter of 2020 which will be worse than the contraction recorded during the great recession of 2008.

With Europe being the epicenter of the pandemic, the global bank believes that the Eurozone economy will shrink by 22% during the second quarter of 2020 while the economy of the United Kingdom will contract by at least 30%.

Overall, global growth is expected to contract by 12% in the first quarter of 2020. However, with China getting its economy back on track, JP Morgan believe that contraction to global growth will be marginal at 1.2%.

Impact on the International Aviation Market

The international aviation market has lost more than $113 billion as a result of the spread of the pandemic.  This is about 14% of the market size ($825 billion) of the global airlines industry. Of the $113 billion loss in revenue, airlines in Australia, China, Vietnam, Japan, Malaysia, Singapore, South Korea and Thailand are the biggest losers as they have lost about $49.7 billion in passenger revenue. In Africa, the loss has totaled $4.4 billion as at March 11, 2020. Accordingly, Job loss in the African Aviation market is high as the jobs of over 262,000 aviation workers is at risk due to the slow-down in the Aviation market, leading to 75% increase in ticket refunds in the first two months of 2020 when compared to the first two months of 2019. While international bookings have fallen by 20% in March, domestic bookings have fallen by 15% and is expected to fall more as countries keep shutting down their air borders in order to contain the spread of the pandemic.

Impact on Sporting Activities

In sports, the impact of COVID-19 has also been devastating as all the major leagues in the world have been suspended. The European championships have also been suspended and players have been at home. This comes at a cost to the teams especially the football clubs in which salaries and wages must be paid based on the contract agreed into with the players. So whether the players play or not, wages must be paid and the money comes from ticket sales, broadcast revenue as well as sponsorship deals. With COVID-19, ticket sales has dropped to zero as well as broadcast revenue. Only the money from sponsorship deal is what is constant as far as the team signs a deal with a sponsor. With suspension in football activities, workers will not be paid but players will be paid based on the contract. However, the money is not coming forth due to the pandemic.

For the premier league alone, more than 100,000 jobs are created by the league and 20 clubs, it contributes 3.3 billion euros to the UK economy in form of taxes and 686,000 travel to the UK to watch a premier league club in a year. For a club like Manchester United (Total revenue as at June 30, 2019= 627.1 million euro) which made 110.8 million euros as match day revenue as at June 2019 and 241.2 million euros as at the same period, it is expected that this revenue will drop by more than 50% if the league were to be canceled. However, if the league comes back to normal after suspension, revenue will not be hit because all money lost will be recouped once they start playing the games missed.

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