As we have witnessed during the current crisis, most countries have largely responded to the Coronavirus pandemic through a complete lockdown of their economic activities. This has indefinitely closed down business enterprise and forced millions of working people like us to stay put at home.
To put it honestly, this lockdown has been the greatest economic destroyer since the Great Depression in the 1930s. According to the International Monetary Fund (IMF), the global economy is projected to shrink by 3% this year - much worse than the economic fallout after the 2008 financial crisis.
Which industries or functions are mostly being impacted by this lockdown? Let us look at five of them.
1. Unemployment or job loss
Probably the only area that impacts our livelihood directly–the global lockdown has certainly accelerated job losses in multiple countries. This is showing up on their unemployment figures – ranging from a low of 3.8% in South Korea to a high of 5.9% in China for the month of May 2020.
What’s worse for job seekers is that this pandemic has spurred job losses in several industries including the service industry, tourism, and hospitality. Additionally, the pandemic has truly reduced economic growth globally – as it has impacted both advanced and emerging economies.
2. Impact on the global services industry
Talking of employment and job creation, the global services industry has been a source of jobs around the globe – and particularly in the U.S and China. With the largest consumer base, these two major economies have largely contributed to global spending and retail sales – all of which has been severely impacted by the lockdown on the consumer and retail market.
With most retail stores forced to shut down, the pandemic has ensured a sharp decline in overall sales. While e-commerce-driven retail in companies like Amazon has been encouraging, it has failed to stem the overall decline in sales for this industry.
But what about global manufacturing? Is it the same story and is there some hope?
3. Manufacturing industry
Thanks to a fall in domestic and external demand, the manufacturing output in most countries has seen a slump in recent months. If we talk about Chinese manufacturers, the U.S-China trade standoff in the recent two years had already impacted China-based factories and their overall output.
What about manufacturing industries outside China? Largely, the pandemic has impacted factories that depend on China for intermediary material to manufacture their own goods. Other manufacturing firms are “facing the pinch” simply due to the severe lockdown measures – as well as a major drop in the demand for their goods.
4. The demand for oil and natural gas
There are high chances that you are not fueling up your vehicles as much as you used to. This is another global (and worrying) trend. The global restriction on international travel has largely contributed to a fall in oil demand. With so many countries going into lockdown mode, the crude oil price has dropped from around $55 for a barrel in February to lesser than $30 in May.
Along with oil, the global demand for natural gas has seen a sharp decline in recent months. Last but not the least, let us talk about the impact of the lockdown on global trade.
5. Global trade
According to the World Trade Organization (WTO), the global volume of both exports and imports is expected to plummet by at least 12.9% this year. When you talk of global supply chains or logistics, the challenge that traders are facing a severe restriction on the movement of goods – despite high availability.
Besides, as trade is not considered an essential service, trading companies cannot employ labor – despite their availability – to drive their trucks or load goods into cargo ships.
Additionally, we find economies like India securing their medical supplies like paracetamol or even face masks – thus effectively banning their exports to other countries.
Thanks to these five factors – and much more, the global economy is expected to largely shrink in 2020 – and into 2021 – as projected by the IMF. Even a slow or partial economic recovery in 2021 will not be enough to undo the damage caused this year. Economic experts estimate that the overall loss to global GDP across 2020 and 2021 could be in the range of over $9 trillion.
The true impact of this unprecedented pandemic remains to be seen.