IMPACT OF THE CORONAVIRUS OUTBREAK ON NATIONAL ECONOMIES

THE IMPACT OF THE CORONAVIRUS OUTBREAK ON NATIONAL ECONOMIES

By

Ifeanyi Idiaye

Introduction

The outbreak of the novel coronavirus, which has claimed hundreds of thousands of lives globally, has impacted the world in highly unprecedented and unexpected ways. Nobody saw it coming, when a disease, which started out as an epidemic, then later turned into a pandemic, will radically change how we live and interact with one another. Some 10 months ago, nobody knew words like “Covid-19”, “social distancing”, or “lockdown”; but today, these words have been forced into our consciousness and vocabulary, and many organisations – public and private – now use them in their corporate social responsibility messages to the public. How long the impact of the coronavirus outbreak on the world will last remains to be seen, as there are ongoing frantic efforts to halt its spread; but in the meantime, it has significantly impacted and disrupted virtually every sphere of human endeavour, including the economic activities of nations. Therefore, this study aims to ascertain the impact of the coronavirus pandemic on national economies, using four countries as its case study, namely: China, Britain, USA, and Nigeria. These four countries have been selected because they are large economies, and they wield considerable influence on the global economic scene.

Keywords: Covid-19, Coronavirus, Novel Coronavirus

The Impact of the Coronavirus on National Economies

China

Although China, which was the global epicentre of the novel coronavirus disease, is beginning to slowly recover economically, at the onset of the outbreak, China’s GDP growth slowed down significantly by about 0.5 per cent, because it suffered a severe shortage of labour, as hundreds of millions of workers were affected by travel restrictions and quarantines, leaving many factories and businesses short of labour, and causing many producers to stop production. Furthermore, with the demand for raw materials dropping significantly, the prices of commodities took a severe hit (Hariharan & Smith-Bingham, 2020). Also, China’s tourism industry has been affected too, as the governments of many countries have desperately evacuated their citizens from China, who had gone there on vacation. In addition, with travel bans imposed, the influx of tourists into China has seriously dwindled, and that has brought about a huge revenue loss for the Chinese government.

Britain

There are fears about the extent of the damage the coronavirus pandemic will wreak on the economy of Britain, especially in the areas of travel and tourism. Unlike China, Britain is globally renowned for its travel and tourism industry, which generates billions of pounds in revenue annually for the economy. According to Fraser (2020), Britain’s travel and tourism industry are responsible for 22 per cent of the economy, with 144,000 businesses and about 920,000 jobs across Britain. But with the coronavirus pandemic having caused many countries to enforce nationwide lockdowns, Britain’s travel and tourism industry have seen a decline of business. The knock-on effect of that is that the unemployment graph in Britain has gone up sharply as many organisations and businesses in the travel industry are laying off workers, who have been rendered redundant by the outbreak of Covid-19. For example, British Airways announced early in April that it will be reducing its global workforce by about 12,000 because of redundancy, as people are no longer purchasing flight tickets or booking flights online, which are the principal sources of income for the company. And as more organisations follow suit in laying off redundant workers, it is only expected that the demand for jobs in Britain will rise exponentially and quickly, and there is likely going to be a mismatch between available jobs and the skill-set of those who have been rendered unemployed (Gillepsie, as cited in Fraser, 2020).

USA

With over 1,000,000 active cases and more than 100,000 lives lost, the US is the global epicentre of the coronavirus pandemic (Worldometer, 2020). There are therefore worries that more people will be infected and could die from the infection. Consequently, lockdowns have been implemented by many states in order to flatten the curve of Covid-19 infection, and physical distancing is also being strongly advocated. However, with a lockdown comes a lull in business activities; and business activities drive the GDP of a country. With the American economy depending a lot on consumption, which makes up 70 per cent of America’s GDP, business activities slowing down and households putting off big purchases have caused a drop in consumption (Miller, 2020). Also, a number of manufacturing concerns have suspended work due to anticipated slump in demand, and Miller noted that manufacturing accounts for 11 per cent of America’s gross domestic product (GDP), while arts, entertainment, recreation, and restaurants make up 4.2 per cent. With the imposed lockdown, these businesses are seeing fewer customers each day, and fewer customers mean a smaller contribution to the economy. Also, more people are losing their jobs, and there is an increase in unemployment insurance claims, especially in states that have been hit harder by the coronavirus outbreak (Chen, Igan, Pierri, & Presbitero, 2020). Clearly, the US economy has been impacted by the coronavirus pandemic, with consumption of produced goods dwindling, manufacturing slowing down significantly, and the unemployment rate going up. Recovery appears slow and is made worse by unprecedented scales of internal social conflicts.

Nigeria

Nigeria, like other major countries of the world, has also seen cases of the coronavirus pandemic. According to the Nigerian Center for Disease Control website, there are over 11,000 confirmed cases of Covid-19 and more than 300 deaths (NCDC, 2020). And just as other major economies around the world are combating the effects of the coronavirus pandemic, and are trying to restore economic stability, Nigeria is struggling with its own challenges. For instance, the Nigerian economy is still heavily dependent on oil, and with the global oil market having been significantly impacted by the Covid-19 pandemic, which has caused a crash in oil prices, there are grave concerns that Nigeria’s economy might slip into a recession, coupled with the effects of the lockdown (What is the economic impact of COVID-19 in Nigeria?, n.d.). Prior to the pandemic, Nigeria’s economy had been struggling to recover from the oil price shock of 2014, with growth in GDP remaining near static at 2.5 per cent, but government spending rising by 20 per cent from ₦8.83 trillion ($24.53 billion) in 2019 to ₦10.59 trillion ($29.42 billion) in 2020 (Onyekwena & Ekeruche, 2020). At this rate of national spending, with little inflow of revenue to offset the spending, Nigeria’s national debt keeps rising. Onyekwena and Ekeruche also observed that household consumption has dropped too, due to restrictions on movement, which has caused most consumers to focus more on essential goods and services. Also, low-income earners and workers in the gig economy, who are uncertain about future earnings, are forced to spend less. The informal sector of the economy and the ever-growing gig economy both combine to contribute about 65 per cent to Nigeria’s gross domestic product (GDP), and as the movement has been restricted, the income-generating capacity of these groups has been negatively affected. Therefore, as Nigeria fights to contain the infectious spread of Covid-19, it is also fighting to contain its ravaging effect on the economy. Only the future can tell whether the fight was successful or not.

The table and graph below show a comparison of the GDPs of the four countries that have been the focus of this study

Final Submission

It is everybody’s earnest desire to see the coronavirus scourge end, so that life – social activities, business activities, and foreign relations – can go back to normal. There are ongoing efforts to find a cure for the virus, in addition to a vaccine to prevent infection. But in the meantime, individuals and countries will have to keep coping with the present world situation. On an individual basis, precautions must continue to be observed in order to prevent infection, such as daily hand washing, the use of alcohol-based sanitisers, wearing of face masks, and observing social distancing. On a national basis, damage control measures must continue to be implemented to reduce the impact of the novel coronavirus disease on national economies.

References

Chen, S., Igan, D., Pierri, N., & Presbitero, A. (2020) The economic impact of Covid-19 in Europe and the US: Outbreaks and individual behaviour matter a great deal, non-pharmaceutical interventions matter less. VOX CEPR Policy. Retrieved from http://www.voxeu.org/article/economic-impact-covid-19-europe-and-us/

Fraser, D. (2020) Covid-19 has become an ‘economic crisis’ says chief economist. BBC News. Retrieved from http://www.bbc.com/news/amp/

Hariharan, K. & Smith-Bingham, R. (2020) This is the impact of the coronavirus on business. World Economic Forum. Retrieved from http://www.weforum.org/agenda/2020/

Miller, C. (2020) The effect of Cocid-19 on the US economy. Foreign Policy Research Institute. Retrieved from http://www.fpri.org/article/2020/

Nigerian Center for Disease Control (2020) Covid-19 Nigeria. Retrieved from http://www.covid19.ncdc.gov.ng

What is the economic impact of Covid-19 in Nigeria? (n.d.) Retrieved June 5, 2020, from http://www.cdcgroup.com/en/

Worldometer (2020) Covid-19 coronavirus pandemic. Retrieved from http://www.worldometers.info/coronavirus/

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