Sunday March 8, 2020 - 12:02:45 GMT
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Global Economy to suffer further as Coronavirus continues to Spread
The Coronavirus outbreak was first officially recognized on the 31st of December in China. Since then, with all the hysteria and panic that came with it, it’s hard to pass that only 2 months have passed.
The outbreak was very fast and uncompromising. To date, some 83 thousand cases have been reported worldwide, and that’s only for the cases that are officially known and documented. In terms of breakdown for specific countries, China unsurprisingly has the overwhelming majority of cases, resting just below 79,000. South Korea is the second, with 2,337 cases, and third would be Italy with 655 cases, only because you can’t count Diamond Princess, which has over 700 cases, as a country. Out of all the recorded cases, over 2800 cases resulted in death, and it was mostly for elderly people.
With the media vastly blowing the situation out of proportion, there’s a lot of fear over the world. This, obviously, means that there’s a lot of economic disturbance and anxiety on a global scale. Conditions such as this effectively halt economic growth, resulting in huge amounts of potential profit being lost.
Damage to the Global Economy
It didn’t take too long for the economic effects to be felt. With China being a vital part of the global economy, its own economy being effectively halted will result in - and is already resulting in - huge financial and economic damage all over the world. Only today, the Dow Jones has dropped around 1200 points, which is highest in history. The S&P 500 also had large drops, losing 3.4%, and the Nasdaq Composite lost 3.7%.
The largest damage was done to the technology and airline stocks. Tech firms like Apple, whose supply chains were majorly disrupted, dropped about 4%. As for the Airline companies, American and Delta have fallen by 9.9% and 7.4% respectively.
According to representatives from the Bitcoin Profit app, the blockchain technology has also suffered losses despite it being considered a safe haven for a traditional market crisis. Experts from other companies have also noted that the Coronavirus outbreak should have been Bitcoin’s time to shine, but instead, it started slumping considerably, which is a terrible sign of what’s to co,e/
In retail industries, companies like Under Armour, one of the biggest sports apparel companies in the world had its stock dropped by nearly 20% in February following the development of the outbreak. The company also added that they’re expecting a drop of $50-$60 million in sales due to Coronavirus in the next quarter. Under Armour was having a tough year as it is, having fallen short of its sales targets. They announced a $15.3 million net loss, as compared to a $4.2 million net income a year ago.
One of the US companies that suffered the most is Tesla, which had its stock drop by around 20% earlier this month after surging 36% only days prior to $969 per share. It has since then dropped to $680 per share and is expected to drop even further.
Despite all this, many believe, that the bulk of the damage is still to be done. Experts believe that global economic growth will be reduced by at least 0.3%. This comes as no surprise, as China’s economy accounts for 17% of global GDP today.
Earlier this month, over 400 companies - most of whom are US-based - have reported expecting a lot of financial loss coming forward. Giant companies like Starbucks, Nike, Apple and McDonald’s have all spoke extensively on the possible effects of the virus, making a lot of mentions on their earnings calls this month. This all means that the outbreak is taken as a very serious threat by these companies, and is looked at as something that will have a large impact on their earnings and operation. One of the companies that are the most apprehensive about the virus and its outbreak was Yum China, the parent of companies like Pizza Hut, KFC, Taco Bell, etc, and mentioned coronavirus-related terms over 45 times during its earnings calls.
What’s likely to come
With such a high level of global economic anxiety, a lot is still to unfold. Economic experts and investors are all making their predictions, most of which are not positive. Warren Buffett, one of the most successful investors in the world, said that Coronavirus is “scary stuff”, but still keeps a positive outlook for the year.
The fact of the matter is, the situation is not as dire as it’s made out to be. Over 32 thousand people have been cured of the virus, and with the weather getting warmer, it’s all expected to get better. Therefore, it’s our collective obligation to not get sold on the panic and anxiety brewed by the media and just do our best to ensure that we’re doing everything in our power to not create a ripe environment for the virus to spread. This can only be done by maintaining basic hygiene and avoiding public amenities unless absolutely necessary.
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