Nobody expected that devastation would visit the world in the form of coronavirus pandemic in the first quarter of 2020. The severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) or the virus causing coronavirus or Covid-19 made its way all the way from Wuhan in China after jumping from animals to humans. It has since spread at a rapid pace to infect thousands across the globe within a short period.

Despite their world-class healthcare facilities, prominent European nations like France, Germany, Italy, Austria and the UK were completely taken off-guard by this life-threatening virus. Countries like Denmark, Spain, the Czech Republic and Poland are maintaining a close vigil on their borders with Italy and Germany, with the number of fatalities in the former having officially exceeded that of even China.

In Australia, over 1,700 confirmed cases were reported till March 23, with 7 people already reported dead.

As was inevitable, this latest global health crisis has also had a serious impact on the health of the world economy. For instance, GDP growth in the world’s second-largest economy, China, slowed from 6 percent to 4.5 percent in the current financial year.

International response to the pandemic

Together with other world leaders, the US president Donald Trump also expressed his concern on the severe impact Coronavirus has had on the global economic growth. He also approved an $8.3 billion aid package to help in faster prevention and research into a vaccine for the treatment of coronavirus. As part of his administration’s measures to contain its spread in the US, Trump proclaimed a national state of emergency on March 13. The US government has also placed restrictions on citizens of countries worst-affected by the coronavirus pandemic from travelling to the country.

However, governments of certain other countries are of an opposite opinion. They are of the view that all efforts must focus must be on containment of the pandemic as complete eradication was impossible at this stage.

Many economists have said that the preventive efforts being made globally to contain the virus’ spread may actually result in a reverse outcome. According to them, the efforts to revive a sputtering world economy could lead to more interpersonal contact and more transmissions. And this could have even more serious repercussions.

A decline in the global economy

Although most people are largely aware of the aftereffects of the coronavirus on human health, only a very few have some idea about its impact on the global economy in the short and the medium-term. So, here is a quick ready reckoner:

• Most educational institutions such as schools and universities that comprise a significant portion of the global economy are closed almost everywhere.

People in most countries have been instructed to stay at home rather than commuting every day to work. This, in turn, has also compelled several companies to go in for either a partial or complete lockdown. Such businesses comprise a large portion of the world economy.

A lot of public and private debt obligations, including housing rentals and interest payments, have also been deferred. The economists have factored this postponement as one of the main reasons behind the abrupt decline in global economic activity.

Important public events have also been cancelled. For instance, Japanese Prime Minister Shinzo Abe has indicated that postponing the $12.6 billion 2020 Summer Olympics scheduled to be held from the first week of August may be an option. Unexpected developments like these have the potential to negatively impact the overall global economic framework.

Preventing the crisis from escalating

Economists are already quite daunted by the current chain of events and their impact on the global economy. Several among them have suggested that appropriate financial aid packages by world governments may help in cushioning a hard landing. For one, this may help in preventing many companies and banks from getting bust under the present circumstances.

It has also been suggested that public health organisations be aided through special government-backed funding arrangements, which will allow them to sanitise public places and factories to enable people to resume work in a much safer environment.

Most importantly, economists have almost unanimously averred that a lack of funds should not pose an obstacle in the global war against Coronavirus as any let-up in this direction could have serious consequences for the health of the global economy. China so far has already witnessed its economy decline by 42 percentage points.

Australia among the most affected

Australia is being counted among the countries whose economies have been the worst affected by the Coronavirus outbreak. The shutdown in China following the quarantine measures announced by Beijing has severely impacted the bilateral trade between China and Australia. This is most noticeable in Australia’s three most important sectors, i.e., tourism, education and exports. Besides, agriculture and marine product exports have also taken a hit.

Andrews Ticehurst, a senior economist at Nomura, Australia, has said that with China and the rest of Asia accounting for nearly 70% of the country’s exports, one could expect more pain in the coming months. Among the developed western economies, Australia is the most China reliant. According to the available data, Chinese nationals constitute 38% of foreign students in Australian universities and 15% overseas tourists.

The crisis is likely to result in Australia expanding exports to other major Asian economies like India and Indonesia and as well as enter into new trading partnerships to reduce its dependence on China.