The Impacts of Coronavirus (COVID- 19) on Economy

By: Baku-Oxford-School student Nazrin Guluzade

To: Cambridge exam center

Introduction:
Coronavirus (covid-19) is a sort of virus which leads to various kinds of diseases.
It has resulted in a worldwide respiratory illness. It is said that coronavirus
originally started in Wuhan. There were early thoughts that coronavirus originated
from the sea food market. However, on January 25,2020 it was said in the report
that the first person who was sick (covid-19) was on December 1st, 2019 and had
nothing to do with the seafood. There is some research going about the root of the
virus and how it was spread throughout the world. There are some symptoms of
covid-19 such as fever, sore throat, kidney failure, death,etc. There are no specific
treatments from covid-19, even though tests and investigations are still going on in
the labs and hospitals. (What Is Coronavirus?, 2020) According to the google
news, 6663304 has been confirmed that they have coronavirus, and 392802 deaths.
(This is fact from the date 08/06/2020). while in countries like Azerbaijan, 7553
were confirmed that they got the virus and there were 88 deaths. (This is fact from
the date 08/06/2020). (2020)
Coronavirus has been impacted on many things but this essay talks about some
main impacts of covid-19 like government expenditure and debts, agriculture,
unemployment rate, industries, environment, future payments and stock markets.

Government expenditure and debts:

One of the impacts of coronavirus is the expenditure. It was agreed that people
pay more money on the medical issues. It is pretty much obvious that more is spent
on useless things than medicine in the times before the coronavirus. Due to
medical issues, there is a rise in debt of the government. There was an increase in
government indebtedness. (the debts will be equal to Obama's effort after the crash
of 2008). (The Effect of COVID-19 on Government Debt, 2020) However, the
government had a lot of spendings on other fields. (before coronavirus). For
example, wars. A huge amount of money has been spent on the wars.US spent 6.4
trillion $ on the wars in Afghanistan, Iraq, Syria and Pakistan (since 2001) but the
US spent 2.2 trillion $ on the covid aid to its citizens. People may fight for food
later because people will starve more but the improvements will be done to the
virus which will be reduced in the long term. As a result people start to realize that
they need to spend the money wisely. Even though wealthy people would not care
about what they are spending on, the middle class would. It will teach the middle
class that earning more money is as important to know how to spend the money
wisely. Because of this, people will start to think less about how to earn more
money, and more about how to spend money wisely. So, they will think less about
it which will reduce their stress even though they may panic about their health
themselves due to the virus. (Alex Abraham, 2020)
In order to save more money, the government has created the bond markets. This
insurance ensures that safe government bonds hold the savings of the private
sectors. This has been done so that the equilibrium interest rates will not drop
down very quickly. European debt insurance will cause the private sector to have
safe assets. The graph Fig.1.1 shows the supply and demand curve for the
sovereign bond markets. Overall, the demand and supply curve shifts to the right
because of the preference of saving the money. (The impact of the COVID-19
crisis on the equilibrium interest rate | VOX, CEPR Policy Portal, 2020)

Fig. 1.1 (The impact of the COVID-19 crisis on the equilibrium interest rate |
VOX, CEPR Policy Portal, 2020)
Consumers try to spend less money on the products because of the covid-19. This
means that the government will have less money on the budget. (because less
consumer spending, less buying product so businesses earn less and their tax
potential goes down which leads to less government tax revenue). In Fig 1.2, it
shows the pattern of the consumer spending during the covid-19. Overall, the
consumer spending has decreased because consumers were less confident in
buying the goods. (The goods were less safe so consumers spent less.) (Ghosh,
2020)

Fig. 1.2 (Ghosh, 2020)

Agriculture:
Due to coronavirus, many people start to realize how important it is to do
agriculture.MEDC countries like Italy do agriculture, but the people are fed with
the foods that were imported from other countries. This virus showed to people
that they should produce more crops and feed it to the locals. Now, since Italy
mainly imports food from other countries, it is suffering more than countries like
Turkey in terms of feeding. Now, many countries are trying to do agriculture to
maintain themselves. (some export it to other countries too). However, even with
that, countries like France are still having problems with some products such as
honey. (restrictions, 2020) For LEDCs countries, there was less suffering to do
agriculture compared to MEDCs, since people already were doing agriculture
despite the low income. For instance, in Asia and Africa, the primary sectors have
employment shares 30.5 and 49 per cents. (however overall, total employment
shares of this sector has fallen from 40.2 to 26.8 per cent in the last two decades.).
(2020) It made sure that the production of foods will lead to enough food for
everyone and the security of food has tried to improve especially after this
pandemic event has been started. But even with trying the best to have safe
products, producers have problems with maintaining safe products.

Unemployment rate and industries:

Covid-19 led to an increase in unemployment rate. Therefore, more people
suffered from poverty. According to the ILO chief, 195 million people could lose
their jobs because of covid-19. 400 million people became poor and more workers
had to be protected from the virus. 43% from the Americas to 26% in Africa are at
high risk of the coronavirus. (ILO: COVID-19 causes devastating losses in
working hours and employment, 2020) Europe and Arab states suffered from
the covid-19 the most. (COVID-19: impact could cause equivalent of 195
million job losses, says ILO chief, 2020)
For instance, the US has claimed that the number of unemployed has risen. Fig 2.1
shows the increase of the unemployment rate. (this US claims that). However in
April, it reaches the peak point and then the unemployment rate is reduced. (this is
their claim.) (How coronavirus has hit employment in G7 economies, 2020)

Fig.2.1 (How coronavirus has hit employment in G7 economies, 2020)

This unemployment rate has been increased for some reasons which can also be
considered one of the factors in which covid-19 has impacts on. Some industries
have stopped working for a period of time. (especially quarantine time). This has
been done so that there would be less chance of the workers to get the covid-19.
For instance, the automotive industry. The demand and the investment has been
reduced due to covid-19. More people fear that if they buy vehicles like cars, they
may get the covid-19. As a result, the revenue from automotive industries has
dropped rapidly. Germany lost 400000 jobs because of the weak sales of the
vehicles. (2020)

. Fig 2.2. ( shows the

economic impact on the automotive industry due to coronavirus) (Economic
impact of COVID-19 on the auto industry | Statista, 2020)

From Fig 2.2, we can understand that the European Union had the most impacts
(badly) because of covid-19. (2543 million US $ of revenue were lost). (Economic
impact of COVID-19 on the auto industry | Statista, 2020)
Another example is tourism. Since countries restrict the amount of people entering
the country, fewer people come. Therefore, people lost revenue that has been
earned from tourism. For instance, Europe is expected to lose 1 billion € per month
because of covid-19. (Google, 2020)
Fig 2.3 (shows the list of some countries tourism industry which were hit badly by
covid-19) (Richter, 2020)

From Fig 2.3, we can see that some countries’ tourism industry were affected
badly due to covid-19. From the chart, we can see that Spain had the biggest
impact on tourism. (Richter, 2020)

Fig. 2.4 (Industries Most and Least Impacted by COVID-19 from a

Probability of Default Perspective – March 2020 Update, 2020)
In Fig. 2.4, we can see that the Airlines industry was most affected by the covid-
19. (US is the example in this case.) (Industries Most and Least Impacted by
COVID-19 from a Probability of Default Perspective – March 2020 Update,
2020)

Environment:

If we look at the environment before coronavirus, it was polluted. People were

trying to think how to earn money for improving the ecology. The thing is Earth is
so polluted that it is practically impossible to reduce that pollution. The trillions of
dollars would be wasted on that. The covid-19 made people stay at home, and the
air started to clean up by themself. For example, in China, emissions fell by 25%
after the instructions stated at home in the beginning of the year and the usage of
the coal has been reduced by 40%. (Henriques, 2020).

Fig. 3.1 (Drops of the pollutant in Wuhan. The level of NO2 did not increase after
Chinese New Year.) (Airborne Nitrogen Dioxide Plummets Over China, 2020)

In Fig. 3.1, we can see the reduction of the nitrogen dioxide in Wuhan and no
NO2 has been risen on February 10-25, 2020. This is because the fewer industries
were working as the time passed. Often, the level of NO2 should rise after Chinese
New Year celebration but due to covid-19, no industries were opened so no NO2
were released. (Airborne Nitrogen Dioxide Plummets Over China, 2020)

Fig.3.2 (The COVID-19 related traffic reduction and decreased air pollution
in Europe | European Data Portal, 2020)

Fig. 3.2 shows that the overall number of the traffic decreases which means that
the number of the harmful gases also decreased. (The COVID-19 related traffic
reduction and decreased air pollution in Europe | European Data Portal,
2020)

Future payments:

The cash has been mostly replaced with credit cards. This is because whoever
touched the paper money may have the coronavirus. To reduce the chance of
getting the virus, they will pay their bills with a credit card. This leads to fewer
people will spend money on illegal things since the banks can see what they are
spending on. There will be someone who will spend money on the cash but at least
it will not be as much as it was before. For example, in the UK 75% of people were
using less cash due to the outbreak according to one survey. 50% of the people in a
survey did not have cash. In Germany, the cash has been expected to be
discredited or banned during these pandemic times. (Arneson, 2020)

In Fig. 4.1, there is a fall of the demand in cash in the US and the list of some
countries in which the demand of the contactless credit cards is getting higher.
(2020)

Fig. 4.1 (2020)

Stock markets:

Due to covid-19, there was a huge drop in the stock market. This was because
there was discouragement in the businesses so less production of goods and
services. 1129 stock markets jumped from 2nd January 1900 to 24th March 2020.
There was a high volatility in the stock markets. The DOW Industrial Average
Index is a stock market index which is used to see the share prices of the 30 largest
companies in the US. The graph Fig. 5.1 shows how stock markets changed from
January 2020 to May 2020. (Weekly DJIA index performance 2020 | Statista,
2020)

Fig 5.1 (Weekly DJIA index performance 2020 | Statista, 2020)

Overall, the stock markets have been decreasing until March 18th, 2020. Then
there was an overall increase in the stock market index after March 18th, 2020.
This was because increased spread of the virus led to the confidence of the
investor. On March 18th 2020, 20704.91 was the stock market index value.
As Baldwin says, “ “COVID-19 and the containment policies have directly and
massively reduced the flow of labour to businesses. The result has been a sudden
and massive reduction in the output of goods and services.” (2020)

Education:

The coronavirus led to closure of the schools which affected 70% of the students in
the world. Schools and universities are trying to have the inline lessons in as best
as possible. Some universities like Harvard prepared online lessons beforehand
while other universities started their online lessons during the covid-19 which were
difficult in the beginning. (Education: From disruption to recovery, 2020)
The Fig 6.1 shows the number of the students enrolled in pre-primary, primary,
secondary and tertiary education. (Education: From disruption to recovery,
2020)

Fig. 6.1 (Education: From disruption to recovery, 2020)

Fig.6.2 (Education: From disruption to recovery, 2020)

Number of learners who were affected:

1186161728

% of total learners who were enrolled: 67%

Number of the country-wide closures: 146

In Fig 6.2, the graph shows the number of learners

who were affected during the covid-19. Overall, the number of learners who were
affected by the coronavirus has been affected. (Education: From disruption to
recovery, 2020)

10 days extra schooling days increases 1% standard deviation of the test score in
the use of the knowledge. For instance, if there were 12 weeks of the loss of
schooling because of the school closures, the loss of the knowledge will decrease
6% standard deviation. However, some schools are replaced with online schools,
but the effect of the improvements are likely to be not more than 10% standard
deviation. (but above 0) (The impact of COVID-19 on education | VOX,
CEPR Policy Portal, 2020)

Conclusion:

Covid-19 did have impacts on the economy of the world as some are mentioned
in the essay above like government expenditure and debts, agriculture,
unemployment rate, industries, environment, future payments and stock markets.
However, there are many other impacts of covid-19 that have not been mentioned
in this essay. Within some time period, additional data will be collected and further
investigation on impacts of covid-19 will be done. These impacts may affect the
future (after covid-19 has been finished) we still do not know. After all, everyone
can see the ‘visible’ sides of the iceberg, but the majority of us are still struggling
in seeing ‘invisible’ sides of the iceberg.

References:

1) Foreign Policy Research Institute. 2020. The Effect Of COVID-19 On

Government Debt, Borrowing, And Spending - Foreign Policy
Research Institute. [online] Available at:
<https://www.fpri.org/article/2020/04/the-effect-of-covid-19-on-
government-debt-borrowing-and-spending/> [Accessed 2 June 2020].

2) Voxeu.org. 2020. The Impact Of The COVID-19 Crisis On The

Equilibrium Interest Rate | VOX, CEPR Policy Portal. [online]
Available at: <https://voxeu.org/article/impact-covid-19-crisis-
equilibrium-interest-rate> [Accessed 2 June 2020].

3) Ilo.org. 2020. COVID-19 And The Impact On Agriculture And Food

Security. [online] Available at:
<https://www.ilo.org/sector/Resources/publications/WCMS_742023/la
ng--en/index.htm> [Accessed 2 June 2020].
4) UN News. 2020. COVID-19: Impact Could Cause Equivalent Of 195
Million Job Losses, Says ILO Chief. [online] Available at:
<https://news.un.org/en/story/2020/04/1061322> [Accessed 2 June
2020].

5) Ilo.org. 2020. ILO: COVID-19 Causes Devastating Losses In Working

Hours And Employment. [online] Available at:
<https://www.ilo.org/global/about-the-
ilo/newsroom/news/WCMS_740893/lang--en/index.htm> [Accessed 2
June 2020].

6) Henriques, M., 2020. Will Covid-19 Have A Lasting Impact On The

Environment?. [online] Bbc.com. Available at:
<https://www.bbc.com/future/article/20200326-covid-19-the-impact-
of-coronavirus-on-the-environment> [Accessed 2 June 2020].

7) Arneson, K., 2020. Will Coronavirus Change Germans’ Love Of

Cash?. [online] Bbc.com. Available at:
<https://www.bbc.com/worklife/article/20200520-will-coronavirus-
change-germans-love-of-cash> [Accessed 2 June 2020].

8) Nber.org. 2020. [online] Available at:

<https://www.nber.org/papers/w26945.pdf> [Accessed 2 June 2020].

9) Statista. 2020. Weekly DJIA Index Performance 2020 | Statista.

[online] Available at:
<https://www.statista.com/statistics/1104278/weekly-performance-of-
djia-index/#statisticContainer> [Accessed 2 June 2020].

10) UNESCO. 2020. COVID-19 Educational Disruption And

Response. [online] Available at:
<https://en.unesco.org/covid19/educationresponse> [Accessed 2
June 2020].

11) Earthobservatory.nasa.gov. 2020. Airborne Nitrogen Dioxide

Plummets Over China. [online] Available at:
<https://earthobservatory.nasa.gov/images/146362/airborne-nitrogen-
dioxide-plummets-over-china> [Accessed 3 June 2020].
12) Richter, F., 2020. Infographic: Who's Most Vulnerable To
COVID-19'S Impact On Tourism?. [online] Statista Infographics.
Available at: <https://www.statista.com/chart/21391/total-contribution-
of-travel-and-tourism-to-gdp-of-selected-countries/> [Accessed 3
June 2020].

13) Statista. 2020. Economic Impact Of COVID-19 On The Auto

Industry | Statista. [online] Available at:
<https://www.statista.com/statistics/1103657/economic-trade-impact-
of-covid-19-on-the-auto-industry-by-market/> [Accessed 3 June
2020].

14) 2020. What Is Coronavirus?. [online] Available at:

<https://www.hopkinsmedicine.org/health/conditions-and-
diseases/coronavirus> [Accessed 7 June 2020].

15) Ghosh, I., 2020. How U.S. Consumers Are Spending Differently
During COVID-19. [online] Visual Capitalist. Available at:
<https://www.visualcapitalist.com/how-u-s-consumers-are-spending-
differently-during-covid-19/> [Accessed 7 June 2020].

16) Spglobal.com. 2020. Industries Most And Least Impacted By

COVID-19 From A Probability Of Default Perspective – March 2020
Update. [online] Available at:
<https://www.spglobal.com/marketintelligence/en/news-
insights/blog/industries-most-and-least-impacted-by-covid-19-from-a-
probability-of-default-perspective-march-2020-update> [Accessed 7
June 2020].

17) Bis.org. 2020. [online] Available at:

<https://www.bis.org/publ/bisbull03.pdf> [Accessed 7 June 2020].

18) News.google.com. 2020. [online] Available at:

<https://news.google.com/covid19/map?hl=en-
US&mid=/m/0jhd&gl=US&ceid=US:en> [Accessed 8 June 2020].

19) Europeandataportal.eu. 2020. The COVID-19 Related Traffic

Reduction And Decreased Air Pollution In Europe | European Data
Portal. [online] Available at:
<https://www.europeandataportal.eu/en/covid-19/stories/covid-19-
 related-traffic-reduction-and-decreased-air-pollution-europe>
[Accessed 9 June 2020].

20) restrictions, C., 2020. French Farm Producers Suffer During

The COVID-19 Restrictions. [online] euronews. Available at:
<https://www.euronews.com/2020/04/17/french-farm-producers-
suffer-during-the-covid-19-restrictions> [Accessed 9 June 2020].

21) World Economic Forum. 2020. How Coronavirus Has Hit

Employment In G7 Economies. [online] Available at:
<https://www.weforum.org/agenda/2020/05/coronavirus-
unemployment-jobs-work-impact-g7-pandemic/> [Accessed 9 June
2020].

22) Voxeu.org. 2020. The Impact Of COVID-19 On Education |

VOX, CEPR Policy Portal. [online] Available at:
<https://voxeu.org/article/impact-covid-19-education> [Accessed 9
June 2020].