The COVID-19 Pandemic: What This Means for the Economy

Written by Sasi Valiveti l Originally published April 9, 2020

At this point, the pandemic continues its expansion. More than 175 countries have reported COVID-19 cases within their borders and this number has reached about 1,447,412 cases worldwide, with nearly 451,491 cases within the United States. This situation is evolving day by day and continues to impact numerous aspects of life, including retail, social events, and education. Along with public health concerns arose the economical crisis, as the pandemic shakes financial markets leading to layoffs all across the country. As more businesses close and the stock market continues to plunge, what could this mean for the economy?

As of noon on Friday, the S&P 500 Index was down about 29% from its peak, with almost 3 years of progress lost. While many predict stocks to continue to plunge, there are many variables at play, and many experts are uncertain as to what would occur. Even though there is a lack of up to date information, it is known that all nonessential businesses have been shut down with operations severely curtailed.

Waves of the virus and social distancing efforts are expected to continue, but at a lower level due to the promise of future treatment. The Morning Star forecasts a 2.9% contraction in U.S GDP in 2020 and predicts that the probability of the scope of the shutdown disrupting the economy in the long term is low because while 70% of the GDP comes from businesses exempt from orders, half of the nonessential businesses can continue in remote operation. The fiscal stimulus should also prevent the collapse in demand.

What does this mean for business? Businesses want to contain the virus. However, some businesses benefit from the overall situation. For example, the outbreak increased the demand for medical products such as facial masks and test kits, which are bought by consumers in an effort to protect themselves against the virus.

However, other businesses suffer from the impact. According to Forbes, Nike relies on China for its production and has expressed the fear of a dip in profit due to the supply chain restriction as a result of constraints in China. Starbucks also closed down a majority of its stores, and Apple began to search for additional suppliers to make up for its losses. Although, with the recent declines in cases from China, Apple expresses optimism about the rebounding of its China supply chain and Starbucks opening most of its locations.

Conversely, with the majority of consumers in quarantine and the number of cases aggressively on the rise, businesses will still experience declines as public health measures continue to decrease economic activity. By far, according to Tourism Economics, the travel industry continues to suffer one of the greatest losses, with travel industry losses resulting in a GDP impact of nearly $502 billion and a tax loss of nearly $62 billion; consumers reportedly feel safer traveling in personal vehicles rather than in flights and cruises.

Overall, the economy and businesses are predicted to be at lows in this period, however, some expect slow improvement with the promise of medical advancement and other measures that are expected to reduce cases. Many predict that social distancing measures and public health restrictions will be removed in the next few months, giving numerous businesses and the economy an opportunity to recover.

Bibliography

Caldwell, Preston, and Karen Andersen. “Coronavirus Update: Long-Term Economic Impact Forecast to Be Less Than 2008 Recession.” Morningstar, Inc., 1 Apr. 2020, www.morningstar.com/articles/976107/coronavirus-update-long-term-economic-impact-forecast-to-be-less-than-2008-recession.

“COVID-19: Implications for Business.” McKinsey & Company, www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business.

“COVID-19 Map.” Johns Hopkins Coronavirus Resource Center, coronavirus.jhu.edu/map.html.

Hall, Jason. “To Invest Amid the Coronavirus Market Crash, Start With This Strategy.” The Motley Fool, The Motley Fool, 21 Mar. 2020, www.fool.com/investing/2020/03/21/to-invest-amid-the-coronavirus-market-crash-start.aspx.

“Market Reactions to COVID-19: Stocks Close down after Roller-Coaster Day.” Marketplace, 8 Apr. 2020, www.marketplace.org/2020/04/07/how-the-markets-are-reacting-to-covid-19/.

Menickella, Brian. “COVID-19 Worldwide: The Pandemic's Impact On The Economy And Markets.” Forbes, Forbes Magazine, 8 Apr. 2020, www.forbes.com/sites/brianmenickella/2020/04/08/covid-19-worldwide-the-pandemics-impact-on-the-economy-and-markets/#1145fe4128c3.

Ncarpenter@ustravel.org. “COVID-19 Travel Industry Research.” U.S. Travel Association, 9 Apr. 2020, www.ustravel.org/toolkit/covid-19-travel-industry-research.