Thoughts of events - Corona's epidemic and possible economic impacts

In light of the spread of the Corona epidemic globally to include both developed and under developing countries - rich and poor -, the efforts of these countries to contain this epidemic, by adopting some preventive measures cast a shadow on the economic reality of these countries in terms of the ability to withstand these preventive measures depending on the extent of its economic development and the quality of its economies.

Here we would like to review some of the economic effects of these measures, that include each country in general:

1 - There is no doubt that the rules to prevent this virus have negatively affected the owners of daily sustenance, who depend on their daily wages to provide the goods and services they need, and they are now in a very critical economic situation.

The situation of the owners of daily sustenance and how to deal with it, depends mostly on the degree of discipline of the private sector and whether this sector’s work is carried out according to pre-determined controls? Or is this sector operating in an unstable way?.

It is clear that the status of this sector is different in developed countries than in under developing countries. Therefore the extent of Successful treatment of the daily sustenance situation is more comfortable in countries with a disciplined private sector and more difficult in other countries in terms of the effectiveness of the measures taken to provide the minimum needs of this segment. From the preceding, it becomes evident that seeking to solve the dilemma of this segment should be a priority for any country’s economy due to the sensitivity of its situation and the social and political consequences if it is not addressed quickly.

2- The decline in the GDP growth of most countries, reaching meagre rates, and the adverse effects of that on providing goods and services, also decreasing the individual and national income.

3 - Because of the second point, most of the central banks in the world have cut interest rates to move the economy wheel with interest rates close to zero, and this is a focal point concerning the government public debt.

As the public debt or what is called

(government debt) is the money assumed by the government from individuals and institutions to face emergencies such as wars or inflation or epidemics as we are now and to achieve different goals such as deficit in public revenues concerning expenditures?

Therefore, the low rates of gross domestic product and the correlation with public debt, the countries will be mostly unable, to meet their obligations at the international level.

4- The services sector was affected negatively and sharply as a result of the preventive measures, except providing the primary food commodities.

5- This point also includes the services sector, as the hotels and aviation activities were negatively affected and incurred heavy losses.

6-All industrial businesses that depend on loans and payments by instalments and rents were adversely affected in terms of problems resulting from the delay in paying them and how to deal with them either with the postponement or with government aid and support.

7 - Undoubtedly, in light of these turbulent economic conditions, gold is usually the best way to save, and this is what happened globally in the early days of the crisis and caused an increase in gold prices. Still, this rise will not last long due to society’s need for cash to secure their needs.

8- The drop in the amount of oil to its lowest level since 2001 due to the slow rate of output growth had to affect the economies of the oil-exporting countries negatively, and the future of the international oil blocs such as OPEC and the question in this concern is- for how far would these countries be committed to their determined shares?.

The other question is: How will these countries cover the salaries of their employees with their vast numbers in light of the decline in oil prices and maintaining the same salary rates for employees and retirees.

9- The events of the epidemic proved the failure of the economic blocs at least so far, by fulfilling their obligations, for example, the European Union countries did not provide the desired assistance to a member state which is Italy

While Russia has done so, this hurts the future of these blocs, which may become evident after the crisis ends.

10- Even sports events were also significantly affected, as Japan was affected by the postponement of the Olympic Games, which was scheduled to take place this year until next year, and thus postponing obtaining the expected revenues for the following year.

Most sports and television broadcasting have suffered losses.

For example, the English FA will lose nearly 800 million pounds if the English Football League matches are not completed, and the rest of the international leagues have suffered the same for various events.

11- International financial institutions such as the International Monetary Fund and the World Bank should play their required roles to help countries finance the deficit in their economies away from the usual unfair terms of raising taxes and reducing employment.

12-Finally and this is what we do not wish for. Many of the wars that have occurred historically were due to economic reasons and were preceded by major financial events such as the Great Depression in 1929 that preceded World War II, so we hope that this crisis will not lead us to worse on the military level.