How Serious Is The Economic Damage From Covid 19?

In times like these, it would be up to the economic researchers to provide the public with reliable forecasts in order to adapt and react to them.

Covid-19: how bad will it be for the economy? | The Economist

However, that is not exactly possible. Forecasts need data as a basis, but they are missing. The most impressive example is provided by the OECD. On Monday, it suspended the publication of the monthly leading indicators (“Composite Leading Indicators”, CLI). Admittedly, the leading indicators are urgently needed to understand how badly the economies are affected by the health crisis, the researchers admit to the renowned organization. But the data available was not yet sufficient to capture the economic effects.

The Domino Effect

A more unfavorable scenario is the domino effect. In addition, if the economic downturn is not limited to China and continues to spread in the most important industrialized countries, business confidence is undermined, travel is paralyzed so that consumption and capital expenditures are severely restricted. In this case, according to the economists of the international governmental organization, the global economy will weaken to an annual average of 1.5 percent. Parts of Europe will fall into recession. The recovery in 2021 will then also be very weak.

Social consumption

Little research has been done into how epidemics paralyze the economy. “In a normal recession, the cause of why production slumped is known, and one can, therefore, draw conclusions about how long this correction will take,” writes Simon Wren-Lewis, Economics professor at Oxford University. In the case of an epidemic or even a pandemic, however, the requirements are fundamentally different from the course of the textbook. For example, because international trade has been interrupted, there is a shock in supply and demand. This slump in consumer spending is complex and it is difficult to estimate.

The corona outbreak also have a huge impact on the entertainment industry which includes casino gambling. While online gambling such as those at dewa898 may not be heavily impacted, there’s still an effect that results in losses.

An above-average number of small businesses are affected.

In this context, Wren-Lewis speaks of “social consumption”, that part of consumer demand in which other people are involved. This can be visits to restaurants, sporting events, travel and much more. With them, the failures are not simply postponed and then made up for, but are permanent losses. His calculation at the time showed that the greatest damper for economic growth was triggered because people reduced their social consumption in order to protect themselves against the flu virus. In these economic sectors, the business development is most likely to resemble an “L”.

It will be difficult to quantify this effect of demand. An above-average number of small businesses are affected. They work more often with a lower capital base and are therefore more at risk than the big names that everyone is currently looking at because their stock prices on the stock markets are dropping spectacularly after years of bull market.