Impact of Corona virus on the global economy ..

The world is presently in the grip of a pandemic - the nCovid 2019 virus. Barely 500 microns in size, it is presently holding the global community to ransom.

At least in the 20th century we have had four major economic disruptions as given in the picture. The world has recovered quite successfully from them, often learning some hard lessons and yes, incurring heavy loss of life, especially the 1918 Spanish flu pandemic, that resulted in killing almost 50 million people wold wide.

It is interesting to know how previous epidemics or pandemics have affected the business world, especially United States of America. (check left pic..)

The big doubt with the business community of the world is,  will the present economic disruption of global markets be tracked,  will it follow the V type, U type or L type revival pattern or scenario. (check right pic..) It is of concern to find when indeed it will recover.

V type scenario is the most likely, there is a fall and an equally likely revival to the same levels as before with stronger sentiments.

The U type revival is slow and can take time to recover, while the L type revival is quick but the economic activity does not pick up to earlier levels and a drop in economic activity is observed. These two scenarios of the U and L type are undesirable. Industry and businesses want revival of the V type, where the business bounces back to the same levels of activity before or even better at times.

If we check all the epidemics that have affected the world in the 20th century all have been of the V  type, indicating a strong revival and growth.  Economists and global policy makers are of the firm opinion that even the Covid 2019 revival will be of the V type.

While the demand side impact like drop or fall in customer confidence and market confidence seems a real possibility, the problem will lie in the supply side fluctuations. With global supply chains under deep distress, it remains to be seen how the future industrial production across the world will get hit.

The lockdown happening in different parts of the world bringing human activities and business activities to a halt has to be viewed with all seriousness. Only positive thinking and good hygienic food practices can help the world climb out of this catastrophe.

The main points for this discussion cams out of a discussion in Alliance University Bangalore of an  HBR article of March 2020 titled, What corona virus could mean for the global economy  (click here). Pic courtesy Harvard Business Review.

George