Macro Economics- Greece; The Macroeconomics of the Flu
Introduction
During the course of time, the occurrence of certain incidents can change our future as well as the course of our thoughts. They can affect the world population in a positive or a negative way. A pandemic, for example, can affect the world population in a very negative way.
Pandemics are of a great danger, especially in this century, where global travelling and poverty are prominent in every corner of the world. These two are the by far most prominent reasons that why a pandemic is imminent and forth coming.
Coronavirus or COVID-19, a disease which first originated in Wuhan, China in late 2019, has now taken a toll on the whole world, affecting it socially, economically and financially.
What exactly is COVID-19?
It is a disease that causes respiratory illness, with symptoms like- cough, fever and if the case is severe it can cause difficulty in breathing as well. But again a question arises that:
How did a virus spread throughout the whole world, in such a short period of time?
It generally spreads through contact with an infected person when they cough and sneeze. It additionally spreads when an individual interacts with a surface or an item that has infection on it, and afterward contacts their face or rub their eyes.
So that is how is slowly and steadily spread from one person to another and now, it has taken over the world. China is where most of the cases have first taken place, infecting more than 80,000 people.
To restrict the virus, the Chinese Government has locked down its city, suspended its business operations, moves that will slow down the second largest economy in the world, and drag down the world economy with it (Lee, 2020). It is developing at a huge rate and is spreading around the world.
Up till now it has entered 205 countries, affected 857,641 people and has caused about 42,006 deaths (World Health organization, 2020). The governments all around the world, have put a halt on its activities, in order to protect its people from this virus.
One-third of the world’s countries, have gone on a coronavirus lockdown. Countries like- India, China, France, Italy, New Zealand, Poland, Spain, Belgium, South Africa, Columbia, Bolivia, Jordan, Tunisia and UK have gone on a lock down, and the respective governments have implemented the quarantine policies, social distancing being the major one, in order to restrict the spread of the virus to more people.
Data and analysis
The companies have allowed work from home to their employees, so that the business does not come on a 100% lockdown, and people still have a means of earning for themselves.
After the covid-19 outbreak and the already going on US-China trade war, American companies like:-Google, Apple and Microsoft are looking to move their production of hardware units away from China, Vietnam and Thailand as well.
But, it won’t be easy, as it is not possible for them to not completely rely on China, as China manufacturing is far more rooted deeper in the American supply chains, on which Sean Maharaj, managing director at AArete, a global management consultancy has also given his views on.
Shifting supply chains quickly might be a lot harder for the companies, as China will be playing a greater role, and there is still a risk of migrating. Companies are trying to find new country or countries to replace China, but it not possible for them to find a new cheap manufacturer as China was. Also, no other country has as great as a logistical set-up as China does.
After the corona pandemic.
It is still doubtful that whether the world’s second largest economy will remain the world’s leading manufacturing hub or not. They may shift to India for production purposes, considering it provides cheap labour, but India has poor logistics, which might not be favourable for the companies.
The outbreak of covid-19 has impacted the Aviation industry heavily as well. This has been happening due to the restrictions of the countries on their citizens to travel abroad in order to contain the virus.
This has resulted in the decrease of the travellers in the flights, flying empty between the airports, leading to the constant cancellation of flights. This adds to the cost of cargo flying across the globe, example- the cost of cargo flying over the pacific has increased thrice to the rate it was before.
Despite the falling of oil prices due to the oil price war between Russia and Saudi Arabia by a quarter, the demand for flights still cannot be compensated. According to the consultancy CAPA Centre for Aviation, the airline industry might be bankrupted by the end of May 2020, as there has been a tremendous loss in the revenue globally, i.e., it has been dropped by 44%.
The airlines have also started laying of its people, for example- Air Canada has temporarily laid off about 5100 employees, while Norwegian Air has temporary laid off 90% of their employees and WestJet has reduced 6900 of its 14000 employees. The airline industry are now taking desperate measures to control its losses (Impact of the 2019-20 coronavirus pandemic on aviation, 2020).
Conclusion
As mentioned earlier, the oil prices have gone down after the outbreak. It is mainly because of the restrictions on the movement of people as well as goods. Also, people have stopped using their own vehicles for a while, which could have been the decisions of the authorities as well, in the interest of their citizens health.
This has considerably hit the demand for oil, which usually accounts for about 90% of global transport fuel. Due to the current financial crisis, the international energy association, expects a decrease in the demand for crude oil during the current 3 month period. This would be a first quarterly decrease in more than a decade. It was expected for the demand to rise for the whole year after the mid-February report, but it slashed its forecasts foe how much it would grow. If the forecasts have been right, it would have been the weakest since 2011. The impact of it on the crude prices have been visible. Opec has been trying to put this around, which it has previously done in the similar situations, that is by cutting the production. It has been currently cutting off the production due to the earlier response in the price falls, but now, it has been thinking of cutting it further and for a longer period of time (Walker, 2020).