The Global Economy Shock Caused by Coronavirus (COVID-19)

The humanity has suddenly and unexpectedly been hit by a pandemic that is sweeping the globe and does not recognize a boundary which is called the Coronavirus (COID-19). After a century of the last plague that swept the world, a new plague appeared to us, beginning from China, and moving within days to Iran (the Middle East), Italy (Europe), and then the United States of America, to spread all around the world totally. Most of the economic forecasts for 2020 were predicting an increase in economic growth from 2.9% in 2019 to 3.3% in 2020 (IMF forecast for January) and after the great shock of the global economy, it recently reduced its growth forecast for this year to 1.5% (OECD) which I think is very optimistic. Jeff Cox, CNBC's financial editor, has shown that economists in the St. Louis area of the Federal Reserve expect employment cuts of 47 million jobs, which will translate into a 32.1% unemployment rate, according to a recent analysis of how bad things are in the United States and in the business sector specifically.

As for the world, the global economy is almost stopped in terms of commercial exchange due to the disruption of many aspects of production, services, communications, transportation, tourism and shopping, in addition to the weak global demand, especially on energy, as oil prices have fallen to less than $20 a barrel, which has caused a significant decrease in the incomes of all the oil producing countries, especially Iraq, which depends on its revenues to export oil at a very large rate. The global financial markets have witnessed collapses, which are the worst since the financial and global crisis in 2008 and may be worse than the crisis in 1929, as indicators have seen (FTSE), Dow Jones Industrial and Nikkei have fallen dramatically since the outbreak of the epidemic began on December 31 and investors fear that the outbreak of the Coronavirus pandemic will destroy economic growth, and government measures will not be sufficient to stop the decline, and to address this situation, even temporarily, central banks have decided in many countries to reduce interest rates or make it zero, in theory, to reduce the cost of borrowing, thus encouraging spending, and then strengthening the state of the economy. As for the transportation and tourism sectors, as a result of reducing the number of flights, closing many airports, imposing lockdown on traveling and moving from one place to another, led to reluctance in invest, spending and tourism.

The consequences are very large on the global economy, especially on countries like Iraq, for example, whose revenues depend largely on oil. Most countries of the world set out to allocate large amounts of money to face this disastrous situation through financial and economic packages such as reducing the interest rate and allocating urgent budgets that were allocated to meet and suspend some fees and social taxes and guaranteeing the necessary loans to overcome the problems of cash flows in the short term and other measures. In Iraq, the federal government has collected donations to the Ministry of Health from individuals and institutions for the purpose of providing the Ministry with the necessary materials and equipment after strict measures were imposed in all the governorates and the Kurdistan region of Iraq, such as imposing curfews and preventing movement between governorates, in addition to what the state provides, citizens have been urged to provide assistance to individuals and families that have been severely affected by the interruption of economic life.

However, these measures taken by the Iraqi authorities are not sufficient to confront neither the short nor the long term, because the expected results from this economic disaster that has befallen the world will change the global economic terrain and will accelerate the process of removing globalization, abolishing convergence and redefining production and consumption throughout the world. Finally, the correct response and reaction from governments, companies and individuals can limit the coming economic downturn, shorten its duration and contribute to a sharper, stronger, and more sustainable recovery.