MBA 1.

SEMESTER 1

Title

Damages caused by Covid-19 to world economy, consumer and markets.

Abstract

The outbreak of covid-19 has resulted in the disaster of the whole economy globally.
The covid-19 is caused by the SARS-COV-2 virus. Wuhan was the victim of this
virus in Dec 2019. Health of population is affected by this virus and population
health is positively related to the growth and welfare of the economy. (Pritchett and
Summer 1996). The hybrid DSGE/CGE global model was used developed by
Mckibbin and Wilco (1999, 2013). There is critical policy interventions and
politicians are ignoring the scientific evidence on the role of public health in the
improvements of quality of life which is a driver of economic growth (Mc Kibbin
2020).

Introduction
Human coronavirus was first identified in 1960 which was responsible for upper
respiratory tract infections in children. 5 new human coronavirus had been identified
in 2003 which resulted in acute respiratory syndrome coronavirus. This virus was
found in human embryonic tracheal organ cultures which was obtained from
respiratory tract of adult. In late 1960’s (Tyrell) who was virologist working on
human strains and many other animal viruses. Ongoing research found that in
temperate climate, coronavirus infections occurred more in winters and spring and
less spread of virus in summer and fall season. After the numerous variety of animal
coronavirus the spread of emergence of SARS( severe acute respiratory syndrome)
was not common which was emerged from Southern China in 2002-2003.
Coronavirus are medium in size composed of RNA viruses. All the virus grow in
cytoplasm of the infected cells. The study of corona-virology has advanced
significantly in the past couple of years (Tyrell).

Hence the spread of Covid-19 is informing the investors, policy makers, public at
large level that this natural disaster can affect economic of the world adversely. The
Covid-19 has the direct impact on global economy.

Objectives

As Covid-19 has already become a reason for shutting the multiple businesses and
closing of supermarkets which seems empty nowadays. Therefore, many economists
have fear and foreseen that the pandemic could lead to inflation.Currently there are
no available vaccine that protect against Coronavirus Disease Covid-19. In rich
countries, lock downs are rough. In poor ones, they haven’t stopped the virus and can
lead to greater suffering.The coronavirus pandemic has lead to an increase in air
quality all around the world. The health crises that the world is going through these
days affected jobs and businesses, closed companies and airports, and stopped most
aspects of life in most countries of the world.

Covid-19 will affect world economy?

In many countries especially the smaller Caribbean regions and the Pacific, Tourism,
Hospitality and Civil Aviation (airlines) are major contributors to gross domestic
product (GDP). With various international actions including border closures and
closures, restricted travel and the need for travel services. Along with this the reduced
demand for goods has completely affected retailers in the tourism sector. In other
words, use abroad as defined by the WTO General Agreement on Trade in Services
(GATS) is limited. This has resulted in a complete reduction of the combined number
of economically advanced countries. The United Nations weather on Wednesday said
the Covid-19 epidemic would drop the country's economy by 3.2 percent this year,
the worst debt since the Great Depression of the 1930s. A mid-year UN report said it
was expected that the novel coronavirus would bring the global economy out of about
$ 8.5 trillion over the next two years, erasing almost all profits in the last four years.
But UN economist Elliott Harris told a news conference that the global economic
situation has "changed" since then, with the death toll of the pandemic rising to
300,000.
On Thursday emphasized the pain of the global economy caused by the coronavirus:
The number of Americans applying for unemployment benefits has risen to over 30
million, and the European economy is shrinking. The calculations are likely to
alleviate the argument that they could ease the shutters that shut down factories and
other businesses. While some provinces and countries have moved forward, health
officials have warned of the danger of a second collision, and some employers and
workers have expressed fears of returning to work when large numbers of people still
die in the US. The government reportedly employed less than 3.8 million workers
who applied for unemployment benefits last week, increasing the figure to 30.3
million in the six weeks since the crisis. Layoffs account for 1 in 6 Americans and
include more people than the entire population of Texas.
Some economists say that when the unemployment rate in the US in April rises next
week, it could rise to 20 percent from an unforeseen recession since the 1930s, when
unemployment rose 25 percent. The number of Americans fired from the work force
may be higher than the number of job cuts, because some people did not apply and
some could not get into their tight plans. A poll by two economists found that the US
could lose 34 million jobs. There was new data all over Europe, too, when more than
130,000 infected people died. The economy in 19 countries uses the euro shrank 3.8
percent in the first quarter of the year, the largest agreement since the eurozone began
to keep up the combined figures in 1995. "This is the saddest day of the global
economy we have ever seen" for the past 50 years the scientists of High Frequency
Economics have been following this information, they wrote in a report.
Covid-19 will affect on small business and trade:
Those businesses and firms that are small medium enterprises (SMEs) involved in the
supply chain are also affected. As demand for goods and services declines globally,
these small businesses therefore either produce less or are compelled to shut down
and move out of the market.
On the other hand, firms that have used technology as an input have gained from this
crisis and have a first mover advantage. For some of the SMEs, further stringent
measures need to be adhered to, in order to remain in the supply chain process for
exports. The exporters need to ensure that goods sourced within the supply chain
adhere to stringent safety requirements that meet the safety of people i.e. protection
of human health. This measures though necessary are likely to increase the marginal
cost of firms in particular the SMEs
As a result of these rising costs and lower wages, firms have laid off workers. At
home and at home the income level has decreased. As more workers join the
unemployment pool, the amount of purchasing power per customer has decreased. At
the same time, savings are also affected as consumers use savings. Investments in
financial markets have also plummeted and confidence in investor shutdown is low.
Financial markets are therefore affected.Supply chain disruption has begun in some
areas not directly related to health and wellness areas, and is expected to continue as
the effects of COVID-19 are heard in many countries, with border closures and
insignificant business closures. The U.S. and other governments seek to mitigate
these impacts where possible, despite significant competition. Members of the
business community should expect delays in working with the coalition government
due to a reduction in staffing. In addition, many organizations are now promoting
online submissions and suspending the hard copy delivery requirements.
Initial reports show a decline in international trade resulting first from the closure of
factories in China, and then prolonged from social distancing policies which result in
an overall drop in economic activity and consumer demand.

Covid-19 will affect on stock market:

The novel coronavirus has not only created an unprecedented challenge to health
care, but also an entirely new economic crisis unlike anything markets have seen
before. Economic forecasts faithfully follow predictions about the severity of the
coronavirus crisis.
As COVID-19 takes bigger bites out of the economy, American morale, the
workforce, and consumer spending, projections for economic recovery grow darker.
Fed chair Jerome Powell made a rare TV appearance to share his optimistic
viewpoint on recovery, but even with rose-colored glasses, he admitted, "It will really
depend on the spread of the virus. The virus is going to dictate the timetable here." If
the spread of the virus is worse, the social distancing and economic shut-down will
need to be more severe to control it
Forget the financial crisis of 2008. The current economic nosedive looks more like
the financial crash of 1929. Depending on how you measure the recovery after the
Great Recession, it took anywhere from seven to 20-plus years for the economy to
recover fully. While the situation is unlikely to get quite as bad today, the economy is
in historic territory.

How Covid-19 affect the Pakistan economy and what is the situation of Pakistan in
these days:
As of 31 May 2020, there have been about 69,500 confirmed cases with 25,300
recoveries and 1,480 deaths in the country. Sindh has recorded the most cases at over
27,400, while Punjab has reported the most deaths in the country, a total of 475.The
country was put under a nation-wide lockdown until 9 May, which was initiated on 1
April and later extended twice Upon its end, the lockdown was eased in phases.
According to a report by the federal government, Pakistan could have expected
50,000 cases of the disease by 25 April
There is no good sentiment in the air on the trading floor of Pakistan Stock Exchange
since the beginning of the month of March. And it all fell down like a house of cards
on Monday (March 9th) when the Kingdom of Saudi Arabia announced waging price
war against Russia to capture the oil market share after Putin’s ego went in against
the US shale producers as the demand for crude has been sliding down with China,
Europe and the rest of the world sneezing hard due to COVID-19 spread.
KSE 100 was down 2106 points just moments after trading started and circuit breaker
had to be triggered to halt trading to reduce the floor’s temperature. But nothing can
provide comfort to an investor in the middle of a looming recession. Karachi Stock
Exchange after a series of bearish sell-offs since then is standing at 30,667 – 20pc
down –as it went through highly volatile two weeks of trading. A sell-off will indeed
leave the firms short of liquidity. Insufficient cash flow as a result of slowing demand
up and down the country with 12.50% central bank’s policy rate will make it hard for
the businesses to ‘breath’ normally having Chinese Virus around.
Almost 60pc of all that Pakistan exports is textile! The problem this sector is
currently facing is that the majority of the raw material –dyes & chemicals– that is
required to produce textile is imported from China. The industry highly contributes to
the foreign currency reserves of the dollar-strapped country that finds itself quite
frequently with just enough reserves to pay for 1.5 to 2 months of imports.
The textile industry has already been suffering from the liquidity shortages as the
highly incompetent Imran Khan government after ending zero-rated status of the
important export-based industries, failed to refund the sales tax proceeds and custom
duty rebates of these firms. The last quarter of the ongoing fiscal year and the first
two quarters of the upcoming fiscal year FY21 would bring unprecedented levels of
cash-shortage problems as the investors have started investing in safe-haven stocks,
gold and dollars.One of the major ‘deficit-powerhouses’ of Pakistan is its national
flag-carrier Pakistan International Airlines (PIA) that has been running a net
operating loss for quite some decades now will end up furloughing the workers if the
situation would persist for the next two to three months. The airline will keep running
a loss of about $63 million a month if its operation would remain suspended for next
25-35 days. The loss of demand is hammering the global aviation sector, with many
small private airlines standing on the verge of facing bankruptcies.
What will be the effect of lockdown caused by Covid-19?
COVID-19 has, however, benefited from the online marketing sector and e-
commerce companies. However, countries participating in cross-border trading and
exporting have been impacted by the closure and change in shipping and trade
requirements for importing imported members. The cultural needs at the border are
already strong. Countries with electronic and commercial customs are less papery
compared to those that still use manual systems and processes. Although consumers
have access to online goods and services, good content delivery is particularly
problematic for products that order via the Internet and need to be exported.
Countries with efficient e-commerce systems and efficient platforms can take care of
the domestic market more efficiently and export. In other words, in developed
economies, SMEs have the necessary access to broad facilities and online services,
the transition from their business models from physical presence to online platforms
will be able to survive. This is, however, a major challenge for SMEs in small and
developing countries.
If you look at the labor market, the number of health workers, retailers and those
involved in online sales has increased due to the increased demand for such services.
There has been a shift of personnel to other sectors in these sectors as necessary. In
the long run, given the labor market changes, there may be job losses in these sectors
as well as lower wages in these sectors.