Global Point
Before presenting 10 tips to make living in confinement better, I would like to come back to the important figures for these past 72 hours (04/01/2020, at 4.30 pm):
- More than 883,000 people are now infected worldwide in 180 countries, out of 198 recognized by the United Nations, or 90% of the countries of the world.
- The United States, Italy, and now, Spain have now overtaken China in terms of confirmed cases, more than 100,000 cases for each of these three countries.
- The number of deaths rose to more than 44,156 worldwide, Italy, Spain and France being the three countries which register a higher number of deaths than China with respectively: 12,428 deaths, 9,053 deaths and 3,523 deaths recorded.
- In UK, 29,841 confirmed cases and 2,352 deaths have now been recorded to date.
- Worldwide, there are 185,377 patients considered to be cured. That means patients who tested positive but who were able to leave the hospital.
To follow the evolution of these figures, I invite you to go to this interactive map, listing all the figures related to the Covid-19 in the world: Click here!
Covid-19 impacts on Global Economy
The new Coronavirus has now spread in 180 different countries, while the daily number of new infected rises worldwide. The vaccine for this virus being in development everywhere around the globe, governments did not have any else answer than putting their own countries in quarantine, making more than 3.3 billion of people worldwide forced to stay home. Besides the human impact, the Coronavirus also has the potential to trigger an economic crisis. This global lock-down has a huge impact on industries; tourists sites, shops, restaurants closing one by one. Only basic necessities are remaining open, depending on the countries and the governors decisions, thousands of people being forced to remain on partial unemployment.
To make it easier to understand, I would like to show the impact of the virus on the key regions which are : China, the European Region and the United States of America, by analyzing the expectations on the evolution of the GDP.
In 2003, the GDP of China represented 8% of the global GDP, at the end of 2019, it was 20%. This difference shows the impact of the globalization on China's development but also the place it has on today's trades and businesses. This increase will help us to better understand why this coronavirus will affect our interconnected world. Analysts can forecast that China GDP would decrease by 3.5% percentage points in 2020, in the worst scenario possible.
This "profound recession" scenario expects to see the quarantines measures to extend in other regions, with new flare-ups outside Hubei Province. "Supply will be severely disrupted, with factories remaining closed and
numerous bankruptcies, while fiscal and monetary policy responses will
not start pushing growth until Q3 2020" says Klaus Fuest for www.rolandberger.com.
This scenario is considered to be the worst possible, otherwise, if the future shows us another scenario, more optimistic, we would enter in a "Fast Recovery" scenario which would means that the government measures have been well-applied and that the country would avoid to enter in a recession, expecting to see the quarantine quickly lifted and production soon return to normal.
In Europe, we could expect to see a huge decrease on GDP figures as the corona outbreak extends. In fact, Europe is the world's biggest trading block, that means that the disruption of supply chains and productions in several industries will surely affect the world's market.
Moreover, we know that the trades between China and the European Union are very important for pharmaceutical industries and electronics, but also, that these two industries are constituting a huge part on global GDP. We will also see a decline on consumption and investments.
For the most optimistic scenario, we could expect to see that "disruptions will only occur in specific sectors, the supply shock will
be less strong, domestic production will only be impacted in Italy and
demand will fall in just a few industries, such as travel and tourism" says Klaus Fuest.
In USA, with its strong focus on the domestic market and orientation towards services, the economy would not be as affected as other regions. The worst scenario for USA foresees a strong impact on NAFTA supply chains and a drop in consumption, with a resulting decline of 1.2% in 2020. Otherwise, in a moderated scenario we could expect to see slowdowns in selected industries only while the fiscal and monetary stimulus remain likely.
Here is a graph showing the different scenarios with, for each of them, the evolution of the GDP on these different regions and worldwide :
Measures applied by the IMF to counter the Coronavirus crisis
On Friday 27th of March 2020, the IMF Managing Director, Kristalina Georgieva said that the "world economy has now entered a recession", which could be "worse than the 2009 recession that followed the 2008 financial crisis".
To counter it, and over the past three weeks, $5 billion in stimulus have been injected to the global economy to assume the world's economy recession, the closing of companies and the bankruptcies.
The IMF wants to focus on three axes : fiscal measures, monetary measures and regulatory measures. By doing that, it expects to control the recession due to the coronavirus and help them to revive.
"The first measure would be to adapt the fiscal policy to support people and businesses, as the Institute for International Finance (IIF) said 2 weeks ago that investors have had $42 billion in emerging markets since the crisis began. This is the largest outflow ever recorded" notes the IMF, which considers it "imperative" that subsidies be put in place for affected companies to avoid cascading bankruptcies and mass layoffs, which would have lasting effects affecting the future recovery and a negative impact on aggregate demand.
Governments must also support low-income households to guarantee them a minimum standard of living.
"Widespread fiscal stimulus will help support aggregate demand," said the IMF. The international institution indeed encourages governments to stimulate investment or reduces taxes; depending on the development of the health crisis and budget availability.
For emerging economies, particularly in Africa, monetary policy will need to balance damping of growth and the fight against external pressures, including commodity price shocks and capital flows reversals.
The second measure will oblige "The central banks to provide liquidity to support the functioning of the market and to alleviate the tensions on the principal financing markets", prescribed the IMF on the monetary side of its analysis. It, therefore, recommends the implementation of open market operations, extended term loans and other measures such as outright purchases and repurchases.
Finally, "the regulatory response must aim to maintain the balance between preserving financial stability, maintaining the soundness of the banking system as well as the economic activity", said the IMF. With the economic impact of the coronavirus expected to affect the ability of borrowers to repay their loans and the level of bank profits, "banks should be encouraged to be flexible in existing regulations and to undertake a careful renegotiation of loan terms for borrowers in difficulty".
Stay safe and take care !
