Case Study on Economical conditions of Brazil during the Pandemic
Introduction
Some of the characteristics of the coronavirus is that it appears to be highly transmissible; an average patient can infect 1.6 to 2.4 other people.
This virus disproportionally affects the older patients. The fatality rate in the 70s is 3-4 times larger than the average rate. For people under 40, it seems to be around 0.2%. It has also been noticed that men are twice more likely to get infected than women.
Covid-19 infects more the young but kills more the old. This key difference can be explained using the comparison of coronavirus cases in South Korea and Italy by age groups.
Korea has tested a large share of the population at random however Italy has tested only the worst symptomatic cases. This comparison suggests that most carriers are actually found in the younger groups.
Synopsis
There have been about seven global recessions over the last century and it is very rare for the global economy as such to contract because there are always countries like China, India which registers some positive growth rates.
So this is the unprecedented nature of the shock. Now people are expecting a 1% contraction assuming that activity begins to resume some sort of a normal path by May or so this year.
If that does not happen we are then looking for the worst global recession since the Great Depression. Bloomberg economics is suggesting that a total of 2.7 trillion dollars is lost in output recession in the US, Europe .
This is the slowest growth record in China and this is assuming the outbreak continues to plague the world through a good part of 2020.
The United Nations conference on Trade and Development untied says that the slowdown in manufacturing in China due to the Covid-19 could cause a 50 billion dollar disruption in trade.
One of the crisis issues the fact that China today contributes almost 90% to the global economy and if China’s economy contracts, the world would suffer from a severe disruption.
This is one of the major reasons of why markets panicked. This is because on last Monday we got the data out of China that in January-Feb, China was the first country to suffer the impacts of it.The data was staggering; the retail sales, fixed investments contracted by 20%.
According to the IGM poll of top economists, a majority of the European and US economists predict a major recession.
SUPPLY vs DEMAND
The IGM poll of the top economists suggest that the impact of demand shock will be larger than that of supply shock.
At first the coronavirus may look like a supply shock due to the disruptions in the global supply chains, quarantine and the social distancing across the world which has decreased labour supply.
However, afterwards the demand effects materializes the uncertainity about the progress of the disesase, about the economic policies that would soon prevail, the increase in speculatory demand as households increase their precautionary savings.
IMPACT ON STOCK MARKETS
This time it is a complete shock that till mid February hardly anybody was even moving the global growth estimates based on what was happening out here and then all of a sudden we have gone from that within a month now pricing in recession of that magnitude and that shows up in the stock markets too.
If you look at the US stock market , you have to go back to the 1929 crash to come across of a period where the stock market has fallen so quickly over such a short span of time. The typical bear market in the US where the stock market falls by 30% happens over 15 months. This time we have seen a 32% decline in 18 days which has never happened before even during the global financial crisis.This data shows the extremity of the current situation.
IMPACT ON TRAVEL SERVICES
The spread of infectious diseases is invariably linked to travel. On account of today, tourism is a huge global business that accounts for 10 percent of the global employment and 10.4 percent of the global gross domestic product (GDP). With the growing years, nothing seems to slow its growth.
The United Nations World Tourism had even predicted a further growth of about three to four percent in the international tourist arrivals for 2020. However, er this was before the coronavirus came into the picture.
The share prices of major airlines, cruise lin, es, and tourism companies dropped by several percentage points This made Gloria Guevara, the president and CEO of the World Travel and Tourism Council (WTTC) fear that the escalation of coronavirus could have a damaging and lasting economic impact on the sector. She has expressed some serious concerns that airport closures, flight cancellations, ns, and shuttered borders often have a greater economic impact on the world than the outbreak itself.
IMPACT ON BRAZIL
The number of coronavirus cases in Brazikeepsep rising. COVID-19 confirmed cases went from 234 on March 17 to 1,891 on March 24, 20,20 with an increase of over 700 percent in seven days. Local transmission had been reported in at least seven states
On March 17, the country also announced its first confirmed death from coronavirus. One week later, at least 34 persons in Brazil had died because of its disease. As of March 25, 2020, São Paulo, the most populated state, had the most confirmed cases in the country, followed by Rio de Janeiro and the Federal District (where the capital, Brasília, is located).
IMPACT ON GDP
As of March 13, 2020, the gross domestic product (GDP) of Brazil was forecasted to grow by 1.68 percent during 2020, down from a 1.99 percent growth estimated in the previous week. This figure, which had remained stable at 2.3 percent during the first six weeks of the year, has decreased for the fifth consecutive week.
Conclusion
The result has been linked with the impacts of the novel coronavirus and COVID-19 in Brazil. It took some weeks, but the Central Bank’s focus report- a weekly survey among top-rated investment firms has finally reflected the overall pessimistic mood about the world economy and Latin America, in particular. On 23rd March the median GDP growth projection by market analysts remained positive at 1.48 percent. However, after a week which is on 30th March, it has dropped to a negative 0.48 percent.