What Economic Effects Does the Spread of Coronavirus Have on the United States Economy?
While the COVID-19 outbreak may be stabilizing in China, it is spreading rapidly in other countries, especially in Japan, South Korea, and Iran. As of February 24, 2020, more than thirty-three countries have reported confirmed cases. Although the number of cases in most countries remains relatively small, it may be just the “tip of the iceberg,” according to World Health Organization (WHO) Director-General Tedros Adhanom Ghebreyesus. Already, U.S. Centers for Disease Control and Prevention (CDC) officials are preparing for the scenario in which the virus evolves into a pandemic—a scenario in which businesses and schools may have to be shuttered for weeks to contain further spread of the virus. As a coronavirus pandemic looms large, how it may affect world economy becomes a major concern.
We use recent data derived from UNIDO’s Index of Industrial Production (IIP) for our analysis of 49 countries representing around 87 per cent of world manufacturing value added (MVA). A comparison of IIP data (adjusted to take seasonal effects into account) for March 2020 vs December 2019 shows that approximately 81 per cent of countries have experienced a decrease in industrial production of 6 per cent on average. A comparison of data for April 2020 vs December 2019 reveals that industrial production fell by 20 per cent on average in 93 per cent of countries. A decrease in the IIP does not necessarily translate into a high impact in terms of health. Countries with a similar number of COVID-19-related deaths may experience different levels of economic loss, depending on the severity of the containment measures implemented or their indirect effects. The distribution of decreases in industrial production is heterogeneous across countries and varies from positive values to losses of more than 50 per cent. India’s IIP fell by 65 per cent, reflecting the drastic cut in exports already flagged in a previous issue of UNIDO’s COVID-19 economic impact analysis. An interesting picture emerges when countries are categorized based on the decrease in their industrial production by comparing data from April 2020 and March 2019. About 50 per cent of the countries suffered a decrease in industrial production of over 20 per cent. The group of countries whose IIP fell between 20 per cent and 30 per cent represents the median of the sample. The group with decreases in IIP of between 10 per cent and 20 per cent includes the highest number of countries. All manufacturing industries were affected by the crisis over the period March 2019–April 2020. The share of countries that experienced a decrease in manufacturing varies from 55 per cent (pharma) to 94 per cent (motor vehicles). In a previous UNIDO COVID-19 economic impact analysis, pharma was actually identified as one of the very few “winners”, while motor vehicles was (and continues to be) one of the biggest “losers”. This demonstrates that the negative trend continued into April across all industries, even though some industries, such as pharma, seem to be slightly less affected than other more vulnerable industries.
The COVID-19 pandemic has caused an unprecedented challenge for healthcare systems worldwide. In particular, the risk to healthcare workers is one of the greatest vulnerabilities of healthcare systems worldwide. Considering most healthcare workers are unable to work remotely, strategies including the early deployment of viral testing for asymptomatic and/or frontline healthcare staff is imperative [Tanne J.H., Hayasaki E.]. High healthcare costs, shortages of protective equipment including N95 face masks, and low numbers of ICU beds and ventilators have ultimately exposed weaknesses in the delivery of patient care. In the US, there is concern regarding uninsured individuals, who may work in jobs predisposing them to viral infection which may lead to significant financial consequences in the event of illness [The Henry J., 2020]. Profound changes to the dynamics of healthcare are likely to ensue, leading to massive investment into disease prevention infrastructure, and the accelerated digital transformation of healthcare delivery. Nicola et al. have highlighted the change in healthcare policy and clinical management as new evidence emerges. The COVID-19 pandemic has resulted in over 4.3 million confirmed cases and over 290,000 deaths globally. It has also sparked fears of an impending economic crisis and recession. Social distancing, self-isolation and travel restrictions have lead to a reduced workforce across all economic sectors and caused many jobs to be lost. Schools have closed down, and the need for commodities and manufactured products has decreased. In contrast, the need for medical supplies has significantly increased. The food sector is also facing increased demand due to panic-buying and stockpiling of food products. In response to this global outbreak, we summarise the socio-economic effects of COVID-19 on individual aspects of the world economy.
In brief, still, global prices of some agri commodities have in recent days reacted volatile due to the coronavirus. Often in line with the moves seen in other asset classes, particularly crude oil prices. Palm oil prices at the Malaysian exchange reacted with a sharp price drop followed by some recovery which can be explained by 1) China is the third largest importer of palm oil in the world importing 14% of all trade palm oil and thus a key demand and price driver; 2) palm oil is used to produce biofuels (1/3rd of the global biodiesel production uses palm oil as a feedstock) and with changes in energy and crude oil prices also prices of biofuels and raw materials used to produce those biofuels move.
Tanne J.H., Hayasaki E., Zastrow M., Pulla P., Smith P., Rada A.G. BMJ; 2020 Mar 18. Covid-19: How Doctors and Healthcare Systems Are Tackling Coronavirus
What Issues Will Uninsured People Face with Testing and Treatment for COVID-19? The Henry J. Kaiser Family Foundation; 2020
Nicola M, O’Neill N, Sohrabi C, Khan M, Agha M, Agha R. Evidence Based Management Guideline for the COVID-19 Pandemic - Review article. Int J Surg. 2020