The Issue
A newly discovered coronavirus, named COVID-19,was first reported in Wuhan, China on December 31, 2019, andquickly spread to well over 400,000 confirmed cases across theworld and more than 18,600 deaths in a matter of months (a livemapof global cases can be found courtesyof Johns Hopkins). As of March, 2020, the new coronavirus has prompted the lockdown of vast areas ofChina, several European and African countries,and major cities around the globe. By March 10, 2021, the disease had killed 2.62million people acrossthe globe with America and Europe recording the mostdeaths.
China, the epicenter of the outbreak, has the second-largesteconomy in the world and is an indispensable part of business intoday’s global economy, namely in manufacturing, trade, and supplychains. Businesses such as Nike,Starbucks and Apple have temporarily closed stores across mainland China; many of thosecompanies are warning of decreased revenue because of closed stores and disrupted supply chains caused byCOVID-19, but few economists have been able to even speculate the magnitude of such economic consequences.
Why Is It News?
Early estimates project that COVID-19 could cost the global economy USD 2.7trillion, with ramifications ranging from gross domestic product tolocal employment. Globalization has led to companies buildingsupply chains across borders, intertwining national economies,meaning the economic losses will be felt far outside ofChina—experts, in fact, are already predicting aglobal recession.Carmakers in China had to slash production by roughly15% in the first quarter of 2020 due to COVID-19. International exporters shipping copper, nickel,zinc, natural gas, and other raw materials to China’s manufacturingplants are slowing down supply immensely, with their freightersbeing put under quarantine each time they visit China. Thecountry’s position as a manufacturing powerhouse and thelargest consumer of raw materials on earth, means any slowdown in manufacturing or supply chain willhave ripple effects around the world, causing a severe drop in thecommodities market.
The outbreak occurred just ahead of Lunar New Year, normallyChina’s busiest travel season. The lucrative tourism industry in China all but halted, leaving hotels and tour groups empty,while Disney reported the profits from its Shanghai park could drop by USD 280 million.As the virus spreads, the tourism, hospitality, and entertainmentindustries (and, by proxy, the airline industry) worldwide hassuffered similar sudden losses, compounded by the cancellation of conferences, festivals, theatre/concert performances, sportingevents, and other large gatherings.
Several industries in Ghana especially the tourismare reporting huge losses, and are appealing to the government for a bailout.This is also the case in the United State. As city- or country-wide shutdowns are enforced and expanded,a number of public spaces are being forced to close their doors, including bars, gyms,restaurants, theatres, and school campuses. Although Ghana has lifted the lockdown on many industries, many arestruggling to recover. Many businesses with remote work capabilities are asking staffto work from home,with mixed early returns, since some businesses aren’t necessarilyequipped for remote work. A slowdown in business creates a slowdownin labor, and local governments are quickly having to adapt to support workers who might experiencea loss of work or income.
In response to the outbreak, the World Health Organization(WHO) initially sent masks, gloves, testing kits, and other equipment tocountriesacross the globe, but warned that the world is quickly running out of personal protective equipment.Consumers started hoarding face masks,along with other products such as hand sanitizers and toilet paper,leading to further strain on the system, with bottlenecks slowingdistribution, and leaving even less equipment for health careworkers on the ground who actually need them.Althoughvaccines have now been developed to arrest the situation, manychallenges remain obstacles to effective control of thepandemic.
The largest factor driving these economic losses is not the virusitself, but how businesses, consumers, and governments areresponding to the outbreak. How severe and lasting theramifications will be remains unseen.
Discussion Questions
With experts predicting largescale recessions, how else do youthink the economic impact of coronavirus will manifest?
How has the pandemic affected your local economy? Do you think yourcity or state was prepared?
Do you think the economy—both globally and locally—can recover fromthe COVID-19 outbreak? What conditions do you think need to be inplace to pave the way for recovery?
4
What benefits/lessons if any has the Covid situation brought tomanaging organizations?
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