About the risk to the world economy due to corona virus

1. CORONA VIRUS :
THE WORLD ECONOMY AT RISK
SUBMITTED TO: MS. RUTIKA SAINI
SUBMITTED BY: TAYYABA
M.COM SEM2 SEC B
TUTORIAL GROUP K
2019-2021
INTERNATIONAL BUSINESS
ASSIGNMENT

2. CHINA’S OUTBREAK
• Today, China’s economy is much more deeply intertwined with the world’s economy—a 17% share of global GDP—
than it was during the 2003 SARS outbreak.
• In this scenario, the global economy would grow by 3.1% in 2020 with China’s GDP growth slipping from pre-outbreak
forecasts of 5.9% to 5.4%.
• The outbreak intensifies and spreads worldwide before being brought under control by June-July, global GDP growth
could dip to below 2%.
• India, the world’s fifth largest economy and a major importer of electronics goods from China, stands to be affected by
the higher prices of Chinese electronic components caused by supply shortages.
• Reduced imports from China are also likely to intensify food inflationary pressures in Q2 2020.
• World’s largest economy, the U.S. is likely to see a significant drop in retail imports in Q1 2020 compared to Q4 2019.
• Also a strong likelihood of the Chinese defaulting on several of the targets, including a $200 billion commitment to
import U.S. agricultural goods (by December 2021), agreed to under Phase 1 of the U.S.-China trade deal of January
2020.
• Africa, a region with deep ties to China, appears to have escaped the brunt of the outbreak. However, It could
overwhelm the weak healthcare infrastructure in the region, depress both commodity prices and export revenues due
to the closure of Chinese ports, and diminish overall growth prospects.

5. COULD CORONAVIRUS BRING ABOUT
THE 'WANING OF GLOBALIZATION'?
• Factory closures and production suspensions are already disrupting global supply chains.
• Producers are taking steps to reduce their exposure to long-distance vulnerabilities.
• Financial commentators have focused on cost calculations for particular sectors: automakers worried about
shortages of parts; textile makers deprived of fabric; luxury-goods retailers starved of customers; and the tourism
sector, where cruise ships, in particular, have become hotbeds of contagion.
• Even in the U.S., where this crisis has only begun to make an impact, the response may fall far short. There are some
shortages of crucial drugs and medical equipment, in part because China remains a critical part of supply chains.
• The coronavirus outbreak remembered as a milestone moment on the road toward the end of the first phase of
globalization.
• Over the past few decades, markets have opened, supply chains have gone global, middle classes have emerged,
and new connections have been made.
• Because of movement of goods and people condition become critical in this case.

6. • The result has been tightened immigration rules, new barriers to trade and investment, a shortening of
supply chains, a technological decoupling and a new emphasis on country-first politics.
• Coronavirus has already forced travel restrictions, accusations between governments and a series of
xenophobic attacks in multiple countries.
• Depending on the level of human and economic damage this virus inflicts around the world, and
considered an important turning point for the entire global economy.
• The rise of the liberal international order has been a major factor in the growing movement of people
across borders, whether for purposes of supply chains and distribution networks, international finance
and the flow of money, employment, study or tourism.
• But this globalization has also allowed the entire world to be much more aware of the spread of the
coronavirus, and it may ultimately be a powerful force for its own undoing.
• More recently, a backlash against the increasingly free flow of information, ideas, money, jobs and
people has created extraordinary political pressures.
• The result has been tightened immigration rules, new barriers to trade and investment, a shortening of
supply chains, a technological decoupling and a new emphasis on country-first politics.

8. POLITICAL ENVIRONMENT
• This pressure has led world leaders and government to announce complete lockdown as a measure for
prevention.
• Another worry: coronavirus has been swallowed into election-year politics. President Trump, anxious to protect
the stock-market gains that he believes will boost his chances of re-election, has argued that Democrats are
exaggerating the coronavirus threat.
• Critics of the President warn that Trump will lean heavily on the Fed for more cuts, less for the sake of U.S.
economic resilience than for the President’s political fortunes.
• The economics of collapse are fairly straight forward. Businesses exist to make profits. If they can’t produce, they
can’t sell things. This means they won’t make profits, which means they are less able to employ us. So, more
people lose their jobs or fear losing their jobs. So, they buy less products.
• The whole cycle disrupts, and we spiral into an economic depression.
• The prescription for solving the pandemic is simple – the government spends, and it spends until people start
consuming and working again.
• The whole point of the lockdown is to stop people going to work, where they spread the disease.

9. IMPACT ON BUSINESS
• Ecommerce platforms, retail chains and kirana stores reported a sharp surge in sales of staples, daily necessities
and personal hygiene products as panic buying took hold across India amid the fear of closures as Covid-19 cases
rise.
• Economic health of countries in Asia—Cambodia, Laos, Myanmar, Philippines and Vietnam, among them—that are
closely tied to China through trade and tourism accounts for nearly 60-90% of the exports and 50% of tourism
revenues ,particularly vulnerable to an economic slowdown.
• Japan’s fragile economy- Reduced supply of critical manufacturing parts from China. If the coronavirus outbreak
widens and persists, Japan could slide into a recession and be forced to call off the 2020 Tokyo Olympics.
• A potentially near-zero growth situation in 2020, with falling vehicle sales causing more heartburn for the German
automotive industry.
• The closure of offices, malls, schools, colleges, multiplexes, pubs and restaurants by almost all state governments
along with work-fromhome directives have also boosted in-home consumption.
CSR RESPONSIBILITY done BY ,COMPANIES contributed major support during lockdown. For instance RATAN TATA
pledges Rs. 1500 cr in support of the fight against COVID-19.

10. OPPORTUNITIES:
• Items such as sanitizers, masks, gloves have gone off shelves or are unavailable online that is totally
unpredictable in earlier times.
• Retailers and FMCG)companies said there are no shortages and that they will speed up supplies to
shops besides seeking to curb hoarding.
• Sales are up 15-45% depending on the category of FMCG goods.
• Companies who are providing online services such as Amazon, Future Group, Grofers, Spencer’s Retail
and sellers on Amazon and Flipkart continues its operations.
• Products such as rice, atta, pulses, edible oil, sugar, biscuit, tea, instant noodle, butter, frozen food,
soaps, handwashes and floor cleaners are flying off the shelves in Mumbai, Delhi-NCR, Bengaluru,
Pune, Hyderabad, Kochi, Thiruvananthapuram and Ahmedabad; in nutshell it rises at worldwide.
• Other big sellers are sanitisers, floor cleaners, toilet paper, tissues and wet wipes. Sites are trying to
clamp down on anyone trying to corner goods in high demand.
• Ecommerce has been a shoot.
• Apps such as ZOOM, SKYPE, WHATSAPP, SWAYAM etc. commits to user support and business
continuity during the outbreak.
• .

12. WORLD ECONOMY WILL GO INTO
RECESSION WITH LIKELY EXCEPTION OF
INDIA, CHINA: UNITED NATIONS
• Predicted loss of trillions of dollars of global income due to the COVID-19 pandemic,
spelling serious trouble for developing countries, according to a latest UN trade
report.
• With two-thirds of the world's population living in developing countries facing
unprecedented economic damage, the UN is calling for a USD 2.5 trillion rescue
package for these nation.
• According to the analysis from United Nations Conference on Trade and
Development (UNCTAD), the UN trade and development body said that the two-
thirds of the world's population being left behind', commodity-rich exporting
countries will face a USD 2 trillion to USD 3 trillion drop in investments from
overseas in the next two years.

13. • The report, however, did not give a explanation as to why and how India and
China will be the exceptions as the world faces a recession and loss in global
income that will impact developing countries.
• However, China has around 3 trillion forex reserves from which they are able to
cope up with the situation (other countries don’t have this much amount).
• Likewise, India since past few months doesn't dependent on exports. Economic
growth is driven by domestic demand.
Further, the deteriorating global conditions, fiscal and foreign exchange
constraints are bound to tighten further over the course of the year.
A USD 1 trillion liquidity injection for those being left behind through reallocating
existing special drawing rights at the International Monetary Fund; a debt jubilee
for distressed economies under which another one trillion dollars of debts owed
by developing countries should be cancelled this year.

14. • In two months since the virus began spreading beyond China, developing countries have taken an
enormous hit in terms of capital outflows, growing bond spreads, currency depreciations and lost
export earnings, including from falling commodity prices and declining tourist revenues.
Lacking the monetary, fiscal and administrative capacity to respond to this crisis, the consequences
of a combined health pandemic and a global recession will be catastrophic for many developing
countries and halt their progress towards the Sustainable Development Goals.
Even as advanced economies are discovering the challenges of dealing with a growing informal
workforce, this remains the norm for developing countries, amplifying their difficulties in responding
to the crisis.
"Advanced economies have promised to do 'whatever it takes' to stop their firms and households
from taking a heavy loss of income," said by Richard Kozul-Wright, UNCTAD's director of globalisation
and development strategies.
• According to reports, the death toll from the coronavirus pandemic has soared past 35,000 while the
number of confirmed cases topped 750,000 globally.

15. TAKEAWAYS
• Update intelligence on a daily basis.
• Create some special reserves for dealing with uncertainties.
• For example, when employees are not on the business premises, ensure some kind of paid (or fringe)
benefits to them, so that they are able to survive.
• Adaptation in business like automobile manufacturers making ventilators.
• Similarly, liquor firms making sanitizers to compensate short supply of the product in the wake of covid-
19.
Thank you..