The beginning of the 21st century has been a turbulent time in many ways, but the current global lockdown caused by the measures imposed by most countries to slow down the spread of the COVID-19 virus has been leaving unprecedented damages.
The cost in human lives is rising by the day, but in many ways the economic aftermath and the loss of jobs and depreciation of assets worldwide are even more troublesome. With so much being lost in sense of economy right now, we may be in for another economic depression in the later part of the year, regardless of how the current situation actually plays out.
Predictions vary from some milder ones that expect the world economy to lose $1 Trillion to those even more extreme ones. According to the following infographic, the actual impact of the recession may reach as high up as $4 Trillion. We took a little look at the numbers and reasons behind why the world economy is suffering so much.
Coronavirus Prevention Measures
From Asia and across Europe and America, most countries of the world have imposed some kind of measures to tackle the coronavirus pandemic. In most cases, these include lockdowns to businesses such as restaurants and bars, but some countries are banning public gathering altogether, closing down factories and much more. The tourism and transportation industries have suffered greatly and the price of oil has plummeted to the lowest point it’s been at in many years.
In terms of slowing down the virus, these measures are mostly giving the desired results. While the disease cannot be snuffed out by these measures, it has been slowed down greatly and most governments seem to believe this is the right approach. Some countries, such as Sweden, opted to go a different route and keep many of their businesses open, with the numbers not showing significant differences in the numbers of those inflicted or deceased due to the virus.
Regardless of which way a country goes, the economic impact that the global lockdown has is felt in every single part of the world. Businesses are bleeding money and being unable to pay their workers, with many governments jumping in to help them. However, in the long run, this too will cost money that simply cannot be afforded without significant loss, with experts claiming that the USA may already be in a depression.
Can the Recession Be Avoided?
The big question, from the economic side of things, is whether or not the recession can be avoided. The answer to this question cannot yet be made, but most likely it is a no. The biggest reason for that is that fear and uncertainty tend to make individuals and companies less likely to want to invest or spend their money and more likely to sit on it, which in turn leads to a less active market, decreasing its value.
The fact is that we have seldom seen such a global panic as we did in the early days of the pandemic. Almost without exceptions, people worldwide stormed the stores trying to purchase what they believed would become scarce goods, regardless of the fact that in most cases the panic proved to be unnecessary.
The same kind of panic could be felt in the business circles, where many business owners quickly went on the defensive and instead of continuing to make investments decided to downsize, slow down production and wait out the crisis.
Like any other recession in the past, this one too will stem mostly from the lack of people’s trust in the market and the lack of liquidity that will inevitably hit both individual households and many companies in the world.
While the recession cannot be completely avoided, there are things governments around the world can do to slow it down and reassuring the masses that the pandemic is not the end of the world is likely the biggest one. Unfortunately, we have seen very little of this in the past weeks and hope remains that those in power will be responsible and not allow the biggest recession of all time to hit the world in the attempts to prevent the disease from taking too many lives.
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Interesting related article: “What is a Recession?”