Going Viral- How coronavirus affects the global markets

Human beings, the most advanced race on planet earth- Often as humans we tend to get entrapped in the vicious, perpetual cycle the society and forget to take a step back and appreciate the world around us and the world within our homes and our loved ones. The entry of the new global pandemic in this scenario suddenly flips the whole system on its tail and shows us the true extent of what we are as a society and the ugly and good sides of this society’s people.

In the last couple of months, the coronavirus has destroyed the entire functioning of the man-made global system known as the ‘economy’. From investor sentiments, consumer confidence to the functioning of the largest institutions of the planet, the global pandemic has brought the world economy down to its knees begging for mercy and has negatively affected the livelihood of pretty much every man and woman on this planet and has distorted their day to day functioning. From the Indian national stock exchange to the American dow jones, global indices have shown us the color of blood dripping right through our screens staring back at us and making our minds ring its emergency sirens. 

The coronavirus has low blown the human species right where it matters with the daunting yet satisfying irony of role reversal showcasing itself to the world of how humans are the ones hiding in their homes in the fear of their lives and animals are the ones roaming around freely in their kingdom. The impact of the coronavirus is having a profound and serious impact on the global economy and has sent policymakers looking for ways to respond. China’s experience so far shows that the right policies make a difference in fighting the disease and mitigating its impact—but some of these policies come with difficult economic tradeoffs. Success in containing the virus comes at the price of slowing economic activity, no matter whether social distancing and reduced mobility are voluntary or enforced. 

In China’s case, policymakers implemented strict mobility constraints, both at the national and local level—for example, at the height of the outbreak, many cities enforced strict curfews on their citizens. Global inflation remains relatively benign in the forecast, ticking up to 2.6% this year before declining to 2.3% in 2021. Lower oil and commodity prices combined with the lagged effects of last year’s slowdown are expected to keep prices in check. Wages are likely to rise as labor markets remain tight, but not accelerate markedly.

High inflationary pressure due to disrupted international trade is where we expect the supply disruptions, combined with existing inflationary pressures to overwhelm the lower demand effects for prices and drive inflation higher, particularly in China. Against this backdrop, policymakers have considerable space to keep policy loose or ease further.

Overall, the world is looking at an economic recession that will cripple the world economy much worse than the bubble bursts of 01’ and 08’ ever did- reiterating the fact the things will get much worse before the light at the end of the tunnel shows itself and matters start getting better and back into the control of the human minds.