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What would be Coronavirus’s Economic Impact in the long-term

coronavirus economic impact

The coronavirus (COVID-19) was first identified in Wuhan, China, and reported on December 31st by the World Health Organization. Now it has spread across the globe. Economists have warned that the hit to the global economy is likely to be worse than the financial crisis, for example, predicting growth this year will shrink by 2.8 percent compared to a 1.7 percent drop in 2009.

What is the economic impact over the near and long-term?

The spread of coronavirus has major implications for companies around the globe. As for the economy, we are in uncharted territory. We have never seen the US economy to the extent that it is now being shuttered. The current situation’s uniqueness makes economic forecasting a little better than fancy guesswork, but that has not stopped some trying. 

Some economic shutdown estimates, see the U.S. In the second quarter, GDP fell by as much as 40 percent. The average estimates we are tracking for the second quarter are -12.4 percent. That estimate of -40 percent is outdated for now, but there is little doubt that we are in the early stages of a severe economic activity contraction.

The good news is that once people return to work and consumers start spending again the economy will bounce back rapidly. The sooner that happens the sooner we can recover as much of the growth we have lost.

As if the outbreak fully contained and the economy to be opened in the second quarter, the third and fourth quarter growth figures should be as eye-catching as large as the second quarter would be concerning.

What policy recommendations are we making?

The coronavirus causes disruptions for companies of all sizes and across all sectors. It may be a temporary and transitory disruption, but there is a real risk that families will lose income, as a result of which companies of all sizes will suffer. As the economical impact due to virus is growing, government leaders should take some of the following actions to save businesses and workers:  

  • Pause payment of payroll taxes which can provide relief to businesses so that they have more cash to keep employees on their payrolls.
  • Lending via the United States Small business Administration and grants for small businesses which can help this sector to endure the crisis.
  • Establishing a bridge loan facility enabling businesses to continue paying employees and providing essential operations for a time on far less, or no revenue.

These are meaningful policy steps that will help mitigate the virus’s economic impact, keep local businesses floating, and help families meet their requirements. Whatever the ultimate impact of the virus is going to be, it’s important that the economy should quickly regain its strength.

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