Economic implications of coronavirus.

The world is grappling with unexpected and unknown financial crises by a deadly Coronavirus. Everyday news is coming up with a further spread of Coronavirus with more number of deaths and infections, nearly 190 countries and territories have reported Coronavirus cases. Adverse effects of this lethal virus have been experiencing in developed and developing economies equally. Travel and tourism, hospitality, food and beverage sector, and stock market are severely impacted. The article attempts an in-depth analysis of how the disease is affecting transport, hospitality, food and beverage, and the stock market.

INTRODUCTION

The Coronavirus first observed in the Wuhan city of China in December 2019 and thereafter spread in the whole world, till March 2020, more than 39,000 people have been dead. The disease has started from the seafood market of Wuhan city, where a lot of wild animals like rabbits, bats, snakes, civets, and so on are traded. The culture of eating wild animals is quite old in China, where these animals have been considered delicacies. The Wuhan market has been suspected as an epicenter of this disease with a large number of patients having a history of visiting this market. The World Health Organization has declared it a health emergency and named it as COVID 19. The virus has the potential to impact the entire world in a monetary and nonmonetary term, this danger has been considered “very high” by the World Health Organization as well as other World Bank. However, China has effectively counter Coronavirus with a large number of proactive actions, but the grim scenario is emerging in European countries such as Italy, Spain, France, and Germany where the virus is spreading exponentially. Now Europe has become the new epicenter of Coronavirus. Apart from European countries, Iran and USA are also facing severe consequences of this deadly virus.

The threat of Coronavirus is hovering all over the world, governments across the countries are trying their best to fight with it, but its impact is too huge. Apart from its impact on life, the economic consequences are also very severe, according to the OECD, it may prove to be the biggest threat to the world economy. The virus has thrown the entire tourism sector into chaos, affected production and productivity, supply chain, stock markets, as well as economic fallout between nations, businesses are losing revenue, factories are closed in China, and millions of people are locked in their homes. As Coronavirus has hampered economic activities, it is imperative to examine the detailed consequences of this virus on economy. In light of ongoing development, the article will describe the implications of Coronavirus in various sectors of the economy.

Coronavirus has affected the entire Chinese economy and because China is the second‐largest economy in the world, its spillover effect is being seen all over the world. The growth rate of most of the sectors in China has come down but the service center has been affected the most. Some sectors of the economy are suffering significantly due to Coronavirus such as transport, hospitality, and food and beverages. Multinational companies are allowing their employees to work from home to stop the spread of this virus. But this drastic measure has various negative economic consequences. However, it is not feasible to work from home in every sector while some companies are asking their workers to go on leave without pay.

IMPACT OF CORONAVIRUS ON TRANSPORT SECTOR

Governments across the countries have issued an advisory to their citizens to avoid unnecessary travel to stop the further spread of the Coronavirus, many countries have canceled the visa of passengers belonging to Coronavirus prone countries. Due to the fear‐mongering environment, people are afraid to travel, due to all these reasons, the transport sector is about to lockdown. According to the International Air Transport Association, the aviation industry may lose between 63 billion dollars and the broad impact can go to 112 billion dollars. Stock prices of airlines have gone down by 25%. Thus, the Coronavirus outbreak is hitting the airline business significantly. Most of the airlines are operating on reduced capacity and implementing immediate cost‐reduction measures like closing down premium lounges, sending staff on unpaid leaves. The impact is estimated to be even worse than the Global Financial Crisis.

Major airlines like Lufthansa and Cathay Pacific have canceled 70% of their flights. Chinese airlines canceled most of its scheduled flights in February and March. Singapore Airlines reduced its planned capacity by 10.3%. The UAE, which is a connecting hub, has warned its citizens and expatriates against traveling until the Coronavirus outbreak subsidies. The Etihad Airways, based in Abu Dhabi and Emirates in Dubai, have asked their employees to stay at home due to reduced number of flights and there may be a possibility of layoffs. Policymakers must take measures to control the impact of the virus on the airline industry. Airlines are trying their utmost to remain alive while they carry out the crucial mission of connecting the economies of the world (Riley, 2020).

Besides, the local transport system has also been badly affected. Most commuter rail, subways, and bus hubs are reporting a significant decline because many people are avoiding public transportation as a result of advisory and precautionary measures (Hawkins, 2020). Therefore, the fewer riders translate to less money for transit agencies and slowdown of economic activity in major cities.

IMPACT OF CORONAVIRUS ON HOSPITALITY SECTOR

As government ban on travelling at national and international level in most of the countries, it hits severely on the hotel and restaurant industry because these industries largely rely on tourists. The occupancy rate of major hotel chains has sharply declined. In the United States, top tier restaurants like Le Bernardin, Daniel, and Union Square Hospital Group's restaurant closed indefinitely. According to the World Travel and Tourism Council, nearly 50 million jobs will be lost in this sector globally due to hotel cancellations. Room occupancy rates have dropped by 50%, and future is dark as the pandemic continues to be reported across the world. The shares of major hotel chains like Hyatt, Marriott, and Intercontinental have fallen about 16%. Mobile World Congress which is a big trade show of technology has also been canceled. Walt Disney Company says that it might lose $175 million due to the Coronavirus (Creswell, 2020). On the other hand, business whim have not closed are required to operate under the enforced half capacity rule by the government. Customers are choosing to stay at home either by preference or curfews. Most of the sports events are either postponed or canceled to restrict the gathering. One of the world's biggest sporting event Olympics has been postponed by a year; Major sporting events like Wimbledon, Indian premier league, Formula one, English premier league, and many other sporting events are under dark clouds all sporting cancellations will further dent the prospects of already struggling travel and tourism industry.

IMPACT OF CORONAVIRUS ON FOOD AND BEVERAGES SECTOR

As the transport and hotel industry is grappling with Coronavirus, closely related food and beverages are also facing the heat. Food and beverage is another important sector that is significantly spoiled. Due to confining situations across countries all café, quick services restaurants, casual and fine dining restaurants, pubs, bars, and lounges have out of business. Its spillover effects has been observed in two ways. First, the layoff of the labor, working in cafes and restaurants, second, weak demand by the stakeholders of the supply chain, stakeholders. These stakeholders are unable to get new orders and payments for previous deliveries. It will ultimately hit the farming community. In addition, online food service providers also stop their services. Its adverse impact is experienced by the local vendors and workforce engage in delivery services. Therefore, a long supply chain which includes farmers, value addition services (such as packaging, grading, and warehousing), wholesaler, transporter, and retailers are seriously affected due to Coronavirus. Major companies like Pepsi, Coco‐cola, General mills, Mondelez, and Unilever are expected to hit by this growing fear (Mccarthy, 2020). Another closely related sector to the food segment is the fresh meat market especially of chicken. Entire poultry sector recorded slowdown in demand. At the event of locked down, people are generally quarantined at home and hoarding the perishable and nonperishable items, which leads to a sharp jump in price particularly for essential food commodities. These high prices are the burning question for poor sections of the socially. Further, the increased shipping and freight costs, as well as disruptions of the supply chain, has choked the production companies.

IMPACT OF CORONAVIRUS ON STOCK MARKETS

Most major stock exchanges have officially entered a bear market because the Coronavirus pandemic has severely impacted most of the listed companies (Cheung, 2020). Market cap at the global level has reduced by 30%. In the whole month of March, high volatility and uncertainly has observed in stock markets across the countries. The stock market of the United States experiences the worst fall since 1987 due to Coronavirus. Similarly, Indian and Chinese economies have suffered records below the observed unprecedented shock. Retail sales, industrial output, and fixed assets investment, all documented a negative growth in major economies that creates fear among investors. Central banks of all big economies slashed the interest rates to encourage the investors but these boosters are not sufficient to win the confidence of the investors. Companies that generate revenue from tourism‐related companies will be critically affected. Given that, investors are selling off, and major indices have plunged significantly. However, the World Bank has taken an initial step to support countries and help them to take this untimely shock of Coronavirus. The World Bank has announced $14 billion in aid to deal with it. It will give financial help to member countries so that these member countries can strengthen the health services and health infrastructure and identify the fatal virus at the right time (World Bank, 2020).