On March 11th, 2020, the World Health Organization officially characterized COVID-19 as a pandemic. As of March 16th, there are over 169,000 confirmed cases of the novel coronavirus in the world, not including cases that have not been reported due to a lack of testing. Public health professionals across the globe have asked people to practice “social distancing.” People are being asked to work from home, to stay 6 feet apart from people, and to avoid gathering in large crowds. Although practicing effective social distancing techniques is essential to preventing the spread of the novel coronavirus, the economic implications of this practice could be detrimental to the global economy, at least in the short term.
Last week, schools and universities across North America shut down to prevent the spread of the virus, and large public gatherings have been banned in the vast majority of countries. The outbreak has led to cancellations of all kinds, including the annual Cherry Blossom Festival in Tokyo, Japan, St. Patrick’s Day celebrations in Ireland, and the Louvre in Paris, France. The virus has also threatened the cancellation of the 2020 Summer Olympic Games, on which Japan has already spent nearly $30 billion.
Because governments are asking their citizens to self-quarantine, society as we know it has come to a standstill. The restaurants, bars, tourist attractions, retailers, and events that allowed people to spend money are shut down for the time being. Airplanes are taking off half-full and hotel beds around the world remain empty. Bloomberg estimates that the COVID-19 disease will cost the global economy $2.7 trillion in lost output, which is nearly equivalent to the entire GDP of the UK. The coronavirus could tip Europe, Asia, and the U.S. into the first global recession caused by a pandemic.
After COVID-19 cases peaked in China on February 13th, the Chinese stock market has already bounced back. As Chinese businesses return to normalcy, however, they are faced with new problems. As the virus spreads throughout Europe and the U.S., factories and manufacturing in those areas will cease to a halt. This will cause demand for raw materials from China to drop, effectively breaking supply chains and forcing China to export significantly fewer products, which will continue to hurt the Chinese economy.
Although long-term improvements to the economy are unlikely to occur until the coronavirus pandemic settles down, there is evidence that the economy will eventually return back to normal, assuming that the virus dies out as we move into the summer months.
For now, it is very important to follow the guidelines outlined by the World Health Organization for protecting yourself and others from the spread of infectious diseases. Wash your hands, cough into your elbow, and stay home if you are sick. It is more important now “flatten the curve,” or to take necessary precautions to curb the spread of disease so that hospitals do not become overloaded. The faster we act, the faster society will rebound.