As the Coronavirus continues to spread around the world, continuing into Europe and African countries way outside of Wuhan, China, I asked myself the question of what the impact all the halted productions will be on the global economy. Due to quarantines severely limiting companies’ ability to receive and supply raw materials and products, supply chains (many of which originate in China) are suffering, globally. Jaguar land rover, has already warned that it could run out of car parts in its British Factories within weeks, similarly with Apple, which signaled the alarm of iPhone shortages (Partington, 2020). Airlines, which also recieve a large portion, 60% of their revenue from commericial passengers will also face a severe shortage of customers, as more countries implement travel bans (Investopedia, 2019).
I believe that the central and national banks are prepared for an economic downturn for several months (if the virus continues to spread at a high rate), however, if more countries and areas will become quarantined, it also forces companies to search for alternative suppliers and producers. This generates bureaucracy and difficult negotiations, further delaying production and slowing cash flow for all companies. Smaller businesses may be unable to cover the cost of halting production for an extended period of time, and I believe that without a cash injection from the government, many sole traders will cease to exist. Similarily, if customers dissapear from airlines, government intervention such as cash injections and nationalization of airlines might become a reality. Consumption hasn’t disappeared, it just been halted, but depending on the length of this period, it will have severe impacts on the global economy if not dealt with appropriately (Ft.com, 2020).
The next few months of 2020 will decide whether transatinal businesses and airlines will be able to survive 2020. Additionally, the global economy will struggle due to the interconnectedness of the world’s supply chains, and the effect of the coronavirus quarantines on them.
Credit to:
Ft.com. (2020). Global stocks tumble after Italy’s coronavirus lockdown. [online] Available at: https://www.ft.com/content/5ec9aeae-56a1-11ea-a528-dd0f971febbc [Accessed 24 Feb. 2020].
Partington, R. (2020). Economic impact of coronavirus outbreak deepens. [online] the Guardian. Available at: https://www.theguardian.com/business/2020/feb/23/economic-impact-of-coronavirus-outbreak-deepens [Accessed 24 Feb. 2020].
Investopedia, 2019. Which Passengers Make The Most Money For Airlines?. [online] Investopedia. Available at: <https://www.investopedia.com/ask/answers/041315/how-much-revenue-airline-industry-comes-business-travelers-compared-leisure-travelers.asp> [Accessed 25 March 2020].
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