CORONAVIRUS AND THE ECONOMY James Brown

CORONAVIURS AND THE ECONOMY

The coronavirus pandemic has affected almost every country in the world. Its spread has left national economies and businesses counting the costs, as governments struggle with lockdown measures to tackle the spread of the virus. Despite the development and distribution of vaccines, most are still wondering what full recovery could look like.

One impact of the coronavirus on the economy is big shifts in stock markets, this is shown through the FTSE, Dow Jones Industrial Average and the Nikkei when there were huge falls in the first months of the crisis as the number of Covid-19 cases grew. The FTSE dropped 14.3% in 2020, its worst performance since 2008. In response, central banks in many countries, including the UK, have slashed interest rates. That should, in theory, make borrowing cheaper and encourage spending to boost the economy. However, this can result in depreciation in the pound meaning exports will become more competitive and imports more expensive.

Another impact of coronavirus has been a huge rise in unemployment. Many people have lost their jobs or seen their incomes cut due to a general reduction in revenue of businesses and therefore they have increased redundancies to minimis e their variable costs. In the United States, the proportion of people out of work hit a yearly total of 8.9%, according to the International Monetary Fund (IMF), signaling an end to a decade of jobs expansion. Some experts have warned it could be years before levels of employment return to those seen before the pandemic. However, coronavirus has also brought new job opportunities such as contact tracers, temperature screeners and Covid-19 testers.

Coronavirus has caused most countries to be in recession. This is measured by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year. The IMF estimates that the global economy shrunk by 4.4% in 2020. The organisation described the decline as the worst since the Great Depression of the 1930s. However, a recession can enable the economy to be more productive in the long term and tends to be a shock, meaning inefficient firms may go out of business allowing new firms to emerge.

The hospitality sector has also been hit hard throughout the coronavirus pandemic, with millions of jobs and many companies bankrupt. Data from Transparent - an industry leading intelligence company that covers over 35 million hotel and rental listings worldwide - has registered a fall in reservations in all the top travel destinations. Billions of dollars have been lost between 2020 and 2021. However, despite the UK resuming international travel on May 17, many analysts believe that international travel and tourism won't fully return to the normal pre-pandemic levels until around 2025.

Retail footfall has also seen unprecedented falls as shoppers have had to stay at home, resulting in a huge surge in online shopping. This has a devastating effect on businesses which require consumer interaction or even consumer product testing. Research suggests that consumers are still feeling anxious about their return to stores. Accountancy giant EY says 67% customers are now not willing to travel more than 5 kilometers for

shopping. However, this change in shopping behavior has significantly boosted online retail, with a global revenue of $3.9 trillion in 2020. This therefore forces businesses to adapt by promoting themselves online.

Pharmaceutical companies appear to be the winners among businesses. Governments around the world have pledged billions of dollars for a Covid-19 vaccine and treatment options. Shares in some pharmaceutical companies involved in vaccine development have shot up - Moderna, Novavax and AstraZeneca have seen significant rises. However, other pharmaceutical companies such as Pfizer have had a share price fall. The partnership with BioNTech, the high cost of production and management of the vaccine, and the growing number of same-size competitors have reduced the investors' trust in the company to have bigger revenue in 2021.

In conclusion, as previously mentioned, the coronavirus pandemic has affected almost every country in the world therefore resulting in global economic fluctuation. Despite negative effects on the stock market, increased unemployment and damage to the hospitality industry, Covid-19 has also changed the way consumers shop, bringing new opportunities to businesses who are able to adapt to suit consumers' desires.