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06-03-2020     3 رجب 1440

COVID-19: An External Shock To Global Economy  

May 21, 2020 | Aamir Wani

 

The COVID-19 outbreak was triggered in December 2019 in Wuhan city in Hubei province of China. COVID-19 continues to spread across the world. Initially the epicenter of the outbreak was China with reported cases either in China or being travelers from china.
In a strongly connected and integrated world, the impacts of the disease beyond mortality and morbidity has become apparent since the outbreak. Amidst the slowing down of the Chinese economy with interruptions to production, the functioning of global supply chains has been disrupted. Companies across the world, irrespective of size, dependent upon inputs from China have started experiencing contractions in production. Transport being limited and even restricted among countries has further slowed down global economic activities. Most importantly, some panic among consumers and firms has distorted usual consumption patterns and created market anomalies. Global financial markets have also been responsive to the changes and global stock indices have plunged.
China being the epicenter of global trade due to lockdown It disrupted the Supply chain, the global effects on supply chains have resulted mostly from the serious situation in China, and it's having an impact on the supply of inputs for many manufacturers and retailers all over the world, and that's important because China is a huge source of components and finished goods. The longer plants in China sit idle, the emptier the global pipeline of parts and components circling the globe, which is meant to feed manufacturers and retailers all over the world. If the disruption continues, we may see many manufacturers, and maybe even retailers, suspending their operations as they run out of the key inputs they need.
This has also affected the aggregate demand, less consumer spending is already hitting each sector hard in the US & other nations, and with a weakening of aggregate demand, a vicious Keynesian cycle of low investment and high unemployment can subsume an economy into a recessionary state.
In addition to the effects on the supply and demand side, COVID-19 has already jolted financial markets. Since February 21, 2020, bond yields, oil, and equity prices have sharply fallen, and trillions of dollars, across almost all asset classes, have sought safety. In the United States, 10-year bond yields have tumbled below 0.5 percent and equity prices on major stock indices around the world have fallen. With ongoing shocks to the supply and demand side, there is potential for further market disruption. Institutions and individuals may be experiencing liquidity stress, including limited access to credit. This might, in turn, increase the probability of default, especially near or in the speculative grade of corporate debt.
Beyond the devastating toll on human health, the pandemic is causing significant economic turmoil in the region through simultaneous shocks—a drop in domestic and external demand, a reduction in trade, disruption of production, a fall in consumer confidence, and tightening of financial conditions. The region’s oil exporters face the additional shock of plummeting oil prices. Travel restrictions following the public health crisis have reduced the global demand for oil, and the absence of a new production agreement among OPEC members has led to a glut in oil supply. As a result, oil prices have fallen by over 50 percent since the start of the public health crisis.
The stock markets have responded to covid-19 pandemic worrying volatility as traders have panic sold out of fear & is showing downward trend.
Right now The immediate policy priority for the region must to protect the population from this coronavirus. Efforts should focus on mitigation and containment measures to protect public health. Governments must work to fullest extent to ensure the medical facilities and basic needs for survival at door step in view complete lockdown.


Email:------- aamirecon@gmail.com

 

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COVID-19: An External Shock To Global Economy  

May 21, 2020 | Aamir Wani

 

The COVID-19 outbreak was triggered in December 2019 in Wuhan city in Hubei province of China. COVID-19 continues to spread across the world. Initially the epicenter of the outbreak was China with reported cases either in China or being travelers from china.
In a strongly connected and integrated world, the impacts of the disease beyond mortality and morbidity has become apparent since the outbreak. Amidst the slowing down of the Chinese economy with interruptions to production, the functioning of global supply chains has been disrupted. Companies across the world, irrespective of size, dependent upon inputs from China have started experiencing contractions in production. Transport being limited and even restricted among countries has further slowed down global economic activities. Most importantly, some panic among consumers and firms has distorted usual consumption patterns and created market anomalies. Global financial markets have also been responsive to the changes and global stock indices have plunged.
China being the epicenter of global trade due to lockdown It disrupted the Supply chain, the global effects on supply chains have resulted mostly from the serious situation in China, and it's having an impact on the supply of inputs for many manufacturers and retailers all over the world, and that's important because China is a huge source of components and finished goods. The longer plants in China sit idle, the emptier the global pipeline of parts and components circling the globe, which is meant to feed manufacturers and retailers all over the world. If the disruption continues, we may see many manufacturers, and maybe even retailers, suspending their operations as they run out of the key inputs they need.
This has also affected the aggregate demand, less consumer spending is already hitting each sector hard in the US & other nations, and with a weakening of aggregate demand, a vicious Keynesian cycle of low investment and high unemployment can subsume an economy into a recessionary state.
In addition to the effects on the supply and demand side, COVID-19 has already jolted financial markets. Since February 21, 2020, bond yields, oil, and equity prices have sharply fallen, and trillions of dollars, across almost all asset classes, have sought safety. In the United States, 10-year bond yields have tumbled below 0.5 percent and equity prices on major stock indices around the world have fallen. With ongoing shocks to the supply and demand side, there is potential for further market disruption. Institutions and individuals may be experiencing liquidity stress, including limited access to credit. This might, in turn, increase the probability of default, especially near or in the speculative grade of corporate debt.
Beyond the devastating toll on human health, the pandemic is causing significant economic turmoil in the region through simultaneous shocks—a drop in domestic and external demand, a reduction in trade, disruption of production, a fall in consumer confidence, and tightening of financial conditions. The region’s oil exporters face the additional shock of plummeting oil prices. Travel restrictions following the public health crisis have reduced the global demand for oil, and the absence of a new production agreement among OPEC members has led to a glut in oil supply. As a result, oil prices have fallen by over 50 percent since the start of the public health crisis.
The stock markets have responded to covid-19 pandemic worrying volatility as traders have panic sold out of fear & is showing downward trend.
Right now The immediate policy priority for the region must to protect the population from this coronavirus. Efforts should focus on mitigation and containment measures to protect public health. Governments must work to fullest extent to ensure the medical facilities and basic needs for survival at door step in view complete lockdown.


Email:------- aamirecon@gmail.com

 


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Owner, Printer, Publisher, Editor: Farooq Ahmad Wani
Legal Advisor: M.J. Hubi
Printed at: Abid Enterprizes, Zainkote Srinagar
Published from: Gulshanabad Chraresharief Budgam
RNI No.: JKENG/2010/33802
Office No’s: 0194-2451076, 9622924716 , 9419400056
Postal Regd No: SK/135/2010-2019
Administrative Office: Abi Guzer Srinagar

© Copyright 2018 brighterkashmir.com All Rights Reserved.