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  • Writer's pictureAccountant High Wycombe

Effects of Corona-virus on the World Economy

Never since the financial crisis of 2008 has the world economy faced such great danger, warns the OECD. Even if the coronavirus epidemic is quickly controlled, growth will not exceed 2.4% this year.

"The global economy is expected to experience a severe slowdown this year as governments work to limit the spread of the new coronavirus epidemic," writes The Wall Street Journal, adding that it is "still very difficult to assess the extent of this slowdown ”.

This is what emerges from the interim report on the Economic Outlook published on Monday, March 2, by the Organization for Economic Cooperation and Development (OECD), under the title “Coronavirus: the world economy under threat”.

In the most optimistic scenario - that is, if the epidemic was “confined to China” and only resulted in “limited outbreaks in other countries” -, global GDP would increase by 2, 4% this year, instead of the 2.9% initially planned. Or a shortfall of 400 billion dollars, notes the American daily.

Growth Could Plateau At 1.5%

But the OECD does not rule out a darker scenario. If the epidemic spreads to Europe and North America with the same intensity as in China, the slowdown will be more pronounced and more prolonged and global growth may not exceed 1.5%. "Containment measures and the fear of infection would take a heavy toll on production as well as expenditure and would lead a large number of countries affected by the epidemic into a veritable recession," said the international organization .

And it's not over: the situation could be even worse “if the new coronavirus were also to be installed in Africa, Latin America and India” , warns the Wall Street Journal .

The OECD also makes some recommendations, adds the daily. To cope with the health emergency, States “should ensure that the health sector and health workers have sufficient funds. They should also help the sectors and workers affected by the containment measures ”.

No, The Coronavirus Is Not Solely Responsible For The Depression Of The Stock Market

The financial markets have just had their worst week since the 2008 financial crisis. But the coronavirus does not explain everything. If there is one place where the Covid-19 epidemic seems to be causing panic, it is the stock markets, which have just gone through their worst week since the 2008 crisis. If the spread of the new coronavirus is finger, this is far from the only reason to explain this collapse.

"The media has abundantly headlined on the 'fear of the coronavirus' which would come to unscrew healthy markets, but this is a summary to say the least reductive," said Axios . Certainly, adds the American site, “it is obvious that the epidemic will have repercussions on businesses. But we still don't know how powerful it will be. ” As we know, the markets do not like uncertainty. It makes them feverish. But, in reality, they had been worried for a while. There are at least four reasons for this.

A Large Part Of The Stocks Were Overvalued

"This is the first time that the S&P 500 stock market index has not suffered a 20% fall for such a long period, and this worries fund managers, who know that good weather is bound to end", noted Axios in another article, February 13, before the stock market plummets.

The observation was based on the results of a survey carried out by the Boston Consulting Group, in November and December 2019, with more than 250 analysts and asset managers working for companies which, together, manage more than 10,000 billions of dollars, long before the coronavirus crisis broke out.

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