There are many questions surrounding the global pandemic due to COVID-19. In addition to the questions regarding containment, vaccines, deaths, and the like, is a very complicated issue: the economy.
There are multiple ways this might impact the global, as well as local, economy.
The most direct problem has to do with interrupted supply chains. When a global economy meets a global pandemic, goods that would typically travel halfway around the world don’t get made. Work forces are incapacitated, travel restrictions are enacted, and end users are sick or on lockdown. As a result, buying and selling of goods doesn’t happen as it normally would.
In addition to that, uncertainty causes stock markets around the world to crash. In turn, this causes wealth to vanish and retirement funds to shrink.
Also, stay-at-home orders means travel companies like airlines and trains have few customers. Large gatherings being outlawed effectively put sports, theater, and music concerts out of operation. Restaurants and bars are restricted to delivery and take-out business. Non-essential businesses are closed.
Whenever the crisis has passed and life returns to relative normality, there may well be many companies, small and large, that go out of business, leading to wide-scale unemployment. A global recession is possible, and maybe even likely.
To try and prevent too much economic hardship, governments are introducing stimulus bills. These may or may not work, but either way, they will add a large burden to the national debt of countries.
On top of everything else is the issue of the effect of the disease. There will be a significant number of worldwide illnesses and deaths. So, how will the loss of these people impact the economy? What will happen to health care workers and systems that have been stretched to — and often past — their limits?
It’s impossible to know what the future holds. But it is possible to think about trends, and to attempt to learn from past experiences. What do you think will happen to the local, national, and global economies? How will the economy be impacted by COVID-19?
Related questions: What is your five year prediction? Ten? COVID-19? What is the greatest problem facing humanity? What are you optimistic about?
1 thought on “How Will The Economy Be Impacted By COVID-19?”
My short answer to this question is that I have no clue. However, I know what I hope (or would have hoped for) regarding the federal COVID-19 response thus far:
For individual households, I appreciate that that cash assistance is coming. However, two things trouble me. First is that I wish the assistance were more targeted: I think most of the money should be going to those living below or close to the poverty line. That money is most likely to be spent locally and for essential goods and services. I also think the assistance would be best provide in waves — the same amount (actually, if more targeted, I’d want more direct assistance) spread out over several months. I fear that most of the near-term spending is going to benefit larger businesses deemed essential (e.g. large, chain grocery stores).
What I hope regarding the small business forgivable loan programs is that it, in fact, go to the smaller businesses. I fear that that program is woefully underfunded and is not (again) targeted enough. I want to see the small businesses like the ones I frequent/use (e.g. Next Chapter Booksellers, Finnish Bistro, All Seasons Garment Care and Tailoring, Dog Days) make it through this crisis. But I don’t know if any or all of them will benefit from this federal assistance. A question I have is whether the assistance will be done on a first-come, first-served basis. If so, I think smaller businesses will have less of a capacity to apply for the programs, while mid-sized companies will have the infrastructure in place to get an application out very soon.
I fear that, as is the case in many trying times, the larger companies with bigger cash reserves will weather this storm and consolidation will gobble up the business that once had gone to local economies.