Coronavirus affects the world economy

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The coronavirus (Covid-19) appeared in December 2019 in the Chinese city of Wuhan, located in Hubei Province (central China). The current spread indicates that the United States as a whole represents, in this month of July, the main focus of the pandemic, Europe having been relegated to second position. Individually, the United States, followed by Brazil, recorded the highest number of infected persons. In Europe, Russia, the United Kingdom, Spain, Italy, Germany and France are the most affected countries.

In the news (in spanish: noticias de actualidad) on July 6, the official report of the World Health Organization was 532,340 people dead and 11,327,790 infected. The spread of the virus continues at a fast pace outside China: 11,242,470 people were infected in 195 countries, mainly in the mail of the United States (2,833,552), Brazil (1577004), Russia (687,862), in the United Kingdom (285,420), Spain (250,545) and Italy (241,611) where 57,186, 37,923, 6,611, 516, 0 and 192 new cases were registered compared to the previous day. 527,692 people died from the virus outside China (4,134 more than the previous day).

 

While the number of new cases reported in China has decreased considerably, assessments since February 26 highlight that the number of new cases observed in the rest of the world now exceeds that of China. As of July 6, there were respectively 202,545 new cases for the rest of the world and 0 cases for China. In the European Union, as already mentioned, Spain and Italy (compared to an older population) are particularly affected with 28,385 and 34,861 people, respectively, who died from the consequences of the virus on July 6. However, the number of deaths per million inhabitants, while Spain and Italy have 608 and 576 deaths respectively as of July 6 and the United States (396) and China (3) have significantly lower numbers, Belgium is distinguished by a much higher number (857 deaths per million inhabitants). According to the latest data from FPS Public Health (July 7), 62,058 patients tested positive in Belgium. The number of new cases per day peaked on April 14th (2,454 patients) and continues to decline. The average number of new cases per day (for the last 7 days, June 26 to July 3), which decreased, was 81.7 on July 7 (including an average of 10.7 new hospitalizations).

How the Virus Affects the Global Economy

Strongly integrated into global value chains, the breaking news about global business in China (noticias última hora sobre empresas en China), the cradle of the epidemic, it has become a major global economic player. In fact, it is now the world's second largest economy with a 15.8% share of global GDP (SPF economy calculations based on World Bank data) and 12.8% share of global exports of goods (United Nations Conference on Trade and Development - UNCTAD - figures). Due to the exponential growth in the number of infections in other geographical areas, measures have been taken to address the unprecedented global health, economic and human crisis.

 

However, it is still premature to accurately measure the negative impact of the pandemic on the global economy. Indeed, there remains great uncertainty about the duration and scope of the crisis, as well as the impact of the measures taken. The IMF forecasts (April 14, 2020) a less marked decline in global GDP growth (-3%) than that of the United States (-5.9%) and the Euro Zone (-7.5%) in 2020

 

McKinsey & Oxford Economics have revised (June 1, 2020) world GDP growth for 2020 as the best scenario to -2.7%, and the worst to -8.0% and that of the Euro Zone to -5.2% and -8.0% respectively. The United States would see its economic growth reach 2.5% in the first scenario and 10.4% in the second.

 

The Economist Intelligence Unit (26 March 2020) now expects a contraction in GDP in the United States (-2.8% compared to a previous estimate of 1.7%) and our main European trading partners by 2020. Italy (-7% against + 0.4%) and Germany (-6.8% against + 0.9%) show a more pronounced recession than France (-5% after + 1%).

 

For its part, the European Commission (May 2020) estimates that the Covid-19 crisis will have a very significant negative economic impact in 2020 on the EU and the euro area and that its direct impact, all channels combined, will lead to a decline in GDP in the EU (-7.4%) and the euro area (-7.7%). In 2021, the European Commission, on the other hand, forecasts a substantial rebound of +6.1% for the EU and +6.3% for the euro zone.

 

According to the OECD economic outlook of June 10, 2020, world economic activity will contract in 2020 (-6.0%) before recovering in 2021 (+ 5.2%). In the event of a second wave of pollution, world GDP would fall by 7.6% in 2020 followed by growth of +2.8% in 2021. GDP in the euro area will fall by 9.1%, before recovering to + 6.5% in 2021. The forecasts of decline for France (-11.4%) and Italy (-11.3%) in 2020 are more severe than for the German economy ( -6.6%). On the other hand, in 2021, France and Italy recorded a more significant increase in their GDP (+ 7.7%) than Germany (+ 5.8%). As for the United States, the OECD expects a drop in GDP of 7.3% in 2020 and a rebound of 4.1% in 2021.

 

Financial markets, exchange rates and commodity prices are again subject to large fluctuations due to the coronavirus, although this impact may be short-lived. The contraction in Chinese demand also caused the fall in the world price of oil (Brent oil). As the European economy is more closely linked to China than the US economy, the euro is under greater pressure than the dollar.




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