ECONOMIC IMPACT OF COVID-19 VIRUS OUTBREAK AND RESPONSE

IMPACTS

No doubt that the short-term economic effects of the virus and attempts to contain it will be significant with many institutions downgrading economic growth forecasts for this year. There is great uncertainty about the scale and duration of the crisis with a lot depending on the effectiveness of public health measures across the globe.

• Reducing consumer spending with leisure, travel, tourism & supply-side disruptions to production already suffering greatly reduced activity in many countries.
• SMEs will face disruption to their business activity and face financial difficulties much more quickly than larger companies. 
• It will impose even faster and larger costs on state and local governments than recessions normally do.
• Global GDP growth declined.

 RESPONSE

There is plenty that monetary and fiscal authorities can do to mitigate although not fully offset the economic effects.

• To prevent health-related crisis does not become a wider liquidity squeeze or credit crunch.
• To ease cash flow pressures on companies and households through delaying tax receipts, temporary tax cuts, wage subsidies.
• Reduce unnecessary traveling and minimise losses resulting from cancellation of business trips.
• Increased benefit payments to those suffering economic loss.
• Cheap central bank loans to commercial banks.
• Reduced interest rates.