Socio-economic effect of COVID-19 on the global economy

Earlier news on outbreak of the coronavirus, commonly called COVID-19, in the Wuhan province in the People’s Republic of China was received with scepticism by leaders and citizens of several advanced, emerging and developing economies across the globe. Most global leaders doubted the exponential effect of COVID-19 on their respective countries and the global economy. Today, the world continues to record significant numbers of confirmed cases, deaths, recoveries, and active cases – among other significant variables, while struggling to find an exact medical solution or prescription for the pandemic. The stir caused and socio-economic effects of the epidemic on global economies are monumental. A pandemic that started in China has penetrated a significant number of countries and territories across the globe.

 

Global Outbreak of COVID-19 and Measures

Some economists argue the world is saddled with a coronavirus recession. That is, an economic recession that is likely to occur throughout the global economy in 2020 due to the coronavirus outbreak. However, available statistics on the pandemic lend credence to the foregoing statement. As at Sunday 29th March, 2020 (about 12:30pm GMT), Worldometers (2020) revealed the coronavirus pandemic had been recorded in 199 countries and territories – and in two international conveyances across the globe.

 

These international conveyances include the Princess Diamond Cruise ship harboured in Yokohama, Japan; and the Holland America’s MS Zaandam Cruise ship. In all, there were about 678,910 confirmed cases, 31,771 deaths, and 146,339 recoveries globally during the period. On 27th March, 2020, Japan recorded 113 new cases. It was the highest number of cases recorded in one day for Japan.

However, the number (113) recorded in Japan did not compare with the thousands of confirmed cases recorded in the United States during the period. The United States is now the epicentre of the pandemic. That is, the country has the most COVID-19 cases in the world; with respective total confirmed cases, deaths, recovered, and active cases of 123,781; 2,229; 3,238; and 118,314. The United States’ dominant prevalence rate confirms earlier predictions by the World Health Organisation (WHO) that the country is likely to be the epicentre of COVID-19, given its sporadic rate of infection.

 

In the United States, the rate of deaths (2,229) relative to the total number of confirmed cases (123,781) was about 1.80% ((2,229 deaths ÷ 123,781 confirmed cases) x 100% = 0.0180076 x 100% = 1.80076 = 1.80%) during the period. The States of New York (59,648), New Jersey (13,386), and California (6,204) had the respective highest confirmed cases in the United States. The recovery rate (about 2.62%) coupled with the death rate (about 1.80%) suggests the United States has more active and critical cases of the pandemic than the former.

 

Severity of the pandemic has compelled the President Donald Trump-led administration to postpone the likelihood of re-opening the United States economy from mid- to the end of April 2020. Health analysts have predicted deaths from the coronavirus in the United States will be more than two hundred thousand. To minimise the effects of COVID-19 on businesses and households, the United States Congress approved a US$2trillion stimulus package on 27th March, 2020; and President Donald Trump signed it into law on 28th March, 2020.

 

Also worrying is the increasing number of confirmed cases and deaths in Italy and Spain. During the same period, the respective total confirmed cases, deaths, recovered, and active cases in Italy were 92,472; 10,023; 12,384; and 70,065. Further, fifty-one (51) doctors who tested positive to the pandemic in Italy were reported dead. On 28th March, 2020, Italy recorded the highest daily jump in deaths since outbreak of the epidemic.

 

China remained fairly stable during the period with the following respective statistics: 81,439 confirmed cases; 3,300 deaths; 75,448 recovered; and 2,691 active cases. The number of active COVID-19 cases in China (2,691) was less than the active cases in each of the over twenty (20) leading countries with confirmed cases in excess of 3,000. For instance, Sweden had total confirmed cases of 3,447 and active cases of 3,326 during the period. The total number of active cases in Sweden (3,326) outweighed the total number in China (2,691), although the latter had comparatively higher confirmed cases (81,439) than the former (3,447).

The rate of deaths relative to the total number of confirmed cases in China during the period was 4.05% (3,300 deaths ÷ 81,439 confirmed cases) x 100% = 0.0405211 x 100% = 4.0521 = 4.05%). This rate was lower than the death rates recorded in Italy (10.84%), Spain (8.29%), Iran (6.89%), France (6.12%), and the United Kingdom (UK) (5.96%) during the period. Although the United States witnessed a sudden increase in COVID-19 cases (123,781), the rate of death relative to total number of confirmed cases during the period was 1.80%. This was comparatively lower than rates recorded in the foregoing countries. On 25th March, 2020, New Zealand announced a four-week shutdown to contain the virus and to prevent further outbreak.

 

The Diamond Princess Cruise ship had respective total confirmed cases, deaths, recovered, and active cases of 712; 10; 597; and 105. MS Zaandam Cruise ship had 2 confirmed and 2 active cases respectively. It is worth emphasising that although the epidemic has spread rapidly and is causing socio-economic destruction to large and small countries and territories across the globe, the effect of COVID-19 on large cities such as Beijing and Shanghai in China has been very minimal.

 

COVID-19 Outbreak in Africa and Measures

Available data from the Africa Centre for Disease Control (2020), Shaban (2020) and Worldometers (2020) indicated that as of 29th March, 2020, the African continent had over 4,379 confirmed cases, 135 deaths, and 302 recoveries. The total number of infected countries is 46 while non-infected is 8 (54 – 46 = 8). Analyses of the pandemic outbreak in Africa are presented on regional basis in this section. The five economies in North Africa are all infected, with Egypt and Libya recording the highest (576) and least (3) number of infections respectively.

Algeria has the second highest number of infections (454) followed by Morocco (437) and Tunisia (278) respectively. On 25th March, 2020, Egypt imposed a fifteen-day curfew from 7pm to 6am; and ordered the closure of schools and other public places. However, the curfew does not affect bakeries and pharmacies. The curfew is intended to save lives of Egyptians, and to prevent further spread of the pandemic. Statistically, Egypt has the second highest number of COVID-19 confirmed cases in Africa. On average, Egypt records about 30 confirmed cases daily. The Egyptian government has noted strict measures will be implemented if the situation worsens or deteriorates over the period.

 

Sao Tome and Principe remains the only Central African economy without COVID-19 cases. Cameroon remains the country with the eleventh-highest number of confirmed cases in Africa (99) and the highest in the Region; followed by the Democratic Republic of Congo (65); Congo Brazzaville (19); Equatorial Guinea (13); Gabon (7); Central African Republic (6); and Chad (5). Botswana, Lesotho, Comoros Islands, and Malawi are the only Southern Africancountries without the coronavirus outbreak.

 

South Africa has the highest number of confirmed cases (1,187) in the region. The other seven infected economies in the region have a relatively small number of confirmed cases. They include Madagascar (39); Zambia (28); Namibia (11); Eswatini (9); Mozambique (8); Zimbabwe (7); and Angola (5). South Africa is the epicentre of the coronavirus in Africa; it is the country with the highest number of confirmed cases on the African continent. South Africa announced a twenty-one (21)-day economic lockdown effective 28th March, 2020. Moody’s has downgraded South Africa’s credit ratings to ‘Junk’ status. Some economic experts affirm the credit rating is timely, since it coincides with prevailing challenges in the South African economy.

 

During the same period, all countries in the Horn of Africa or East Africa – with the exceptions of South Sudan and Burundi, had confirmed cases of the coronavirus. Mauritius has the highest number of infections (102), with Somalia recording the least number (3) in the region. The other breakdowns are as follows: Rwanda (60); Kenya (38); Uganda (30); Ethiopia (19); Djibouti (15); Tanzania (14); Seychelles (8); Eritrea (6); and Sudan (5).

See Also:  ECOWAS leaders strategise to combat COVID-19

Uganda ranks 17th on the list of countries with the highest number of COVID-19 confirmed cases in Africa. On 26thMarch, 2020, the Ugandan government announced certain measures to ensure containment. These include a fourteen (14)-day suspension of all public transport; and a ban on the sale of all non-food items in the country during the period.

 

The only surviving economy in the West African sub-region in presence of the coronavirus pandemic is Sierra Leone; all the other fifteen (15) member-countries, including Ghana, have been infected. Burkina Faso has the highest rate of infection (207), followed by Senegal (142); Ghana (141); Cote d’Ivoire (140); Nigeria (97); Togo (28); Mali (18); Niger (18); Guinea (8); Cape Verde (6); Benin (6); The Gambia (3); Mauritania (3); Liberia (3); and Guinea-Bissau (2). Respectively, Senegal and La Cote d’Ivoire rank 7th and 9th in Africa in terms of confirmed coronavirus cases.

On 23rd March, 2020, the two presidents declared a state of emergency in their respective countries; and instituted measures to impose heavy fines on individuals and groups who violate laid-down procedures intended to curb further spread of the coronavirus. Nigeria ranks 12th for the total number of confirmed COVID-19 cases in Africa. Mr. Atiku Abubakar, a former Vice President of Nigeria, has donated an equivalent of US$140,000 as his contribution in the fight against coronavirus in Nigeria. It is believed similar donations will alleviate the plight of average Nigerians, following the epidemic’s devastating effects on the economy.

 

Basic Statistics on Africa

Available data indicate the total number of confirmed cases in Africa (4,379) represents about 0.65% ((4,379 ÷ 678,910) x 100% = 0.00645 x 100% = 0.645 = 0.65%) of total confirmed cases in the pandemic across the globe (678,910). Total deaths (135 deaths) recorded in 46 countries on the African continent represent about 0.43% ((135 ÷ 31,771) x 100% = 0.004249 x 100% = 0.4249 = 0.43%) of deaths recorded globally. The total number of cases recovered (302) in 46 African countries translates into 0.21% of total cases recovered globally (146,339). The intra-recovery rate relative to the total number of confirmed cases (4,379) in 46 countries during the period is about 6.90% ((302 recovered cases ÷ 4,379 confirmed cases) x 100% = 0.068966 x 100% = 6.8966 = 6.90%). This suggests the prevalence of a high rate of active and critical cases (about 93.10%) (100% – 6.90% = 93.10%) on the African continent.

 

As noted earlier, South Africa has the highest number of confirmed COVID-19 cases (1,187). However, it has one of the least COVID-19 reported deaths (1) on the continent. The total number of deaths-to-confirmed cases rate in South Africa (0.08%) ((1 death ÷ 1,187 confirmed cases) x 100% = 0.0008425 x 100% = 0.0843 = 0.08%) compares favourably against the rates recorded in Algeria (6.39%); Egypt (6.25%); Morocco (5.95%); Ghana (3.55%); and Tunisia (2.88%) during the period.

So far, Africa has on average about 95.20 confirmed cases (4,379 confirmed cases ÷ 46 infected countries = 95.1957 = 95.20 confirmed cases); 2.94 deaths (135 total deaths ÷ 46 infected countries = 2.93478 = 2.94 deaths); and 6.57 recovered cases (302 total recovered cases ÷ 46 infected countries = 6.5652 = 6.57 recovered cases). Thus far, Sao Tome and Principe (Central Africa); Botswana, Lesotho, Comoros Islands, and Malawi (Southern Africa); South Sudan and Burundi (East Africa); and Sierra Leone (West Africa) remain the only eight African countries which have not recorded cases related to the Coronavirus pandemic.

 

Economic Effect on Ghana

The global rankings as at 29th March 2020 revealed Ghana ranks 94th among 199 countries and territories with confirmed cases of the epidemic; and ranks 8th among 46 infected economies on the African continent. In Ghana, at least seven (7) immediate- and medium-term impacts of the coronavirus pandemic on the economy have been identified:

These include a fall in projected revenue mobilisation from the sale of crude oil in the global market; likely fall in revenue projections from tariffs collection by the Ghana Revenue Authority (GRA) through the various ports; fall in periodic corporate tax payments; challenges to prompt payments on national debt or interests or both; increase in national health expenditure; significant reduction in international trade, foreign direct investment (FDI), travels, tourism, conferences, poverty reduction, and food nutrition; and a financing gap in the 2020 Budget, among others.

Some economic analysts attribute the fall in price of crude oil per barrel in the global market to a sharp decline in demand for the product by China. Other factors include closure of borders, and considerable decrease in exports and imports among global economies. The enactment of quarantine policies by most COVID-19-infected countries, including Ghana, has impacted negatively on business operations and productivity in many sectors of their respective economies.

On Friday 27th March 2020, Ghana’s President Nana Addo Dankwa Akufo-Addo announced additional preventive measures instituted by the state to curb further spread of the coronavirus; and economic measures to assist small- and medium-sized businesses mitigate adverse effects of the pandemic on their trading activities and operations. These include a fourteen (14)-day partial lockdown with strict enforcement; GH¢1billion financial assistance through the Ministry of Finance; GH¢3billion monetary assistance through GCB Bank; reduction in policy rate from 16% to 14.5%; and directive by the Bank of Ghana to various banks to lower their minimum reserves requirement by 2% to increase liquidity and facilitate economic stimulation.

In addition, charges on mobile money transactions (involving transfers) from a pesewa to GH¢100 have been waived; and respective limits on GH¢300, GH¢2,000, and GH¢5,000 mobile money transactions have been increased to GH¢1,000, GH¢5,000, and GH¢10,000. The latter is intended to improve on social distancing by limiting face-to-face transactions; and encouraging cashless transactions in the economy. Due to the exigencies of the pandemic outbreak, Ghana’s projected gross domestic product (GDP) growth rate for the 2020 financial year has been revised from 6.8% to 2.5%.

However, this compares favourably with the current negative 42% growth rate projected for the Chinese economy during the same period. Should the projection hold, it would be the first contraction of the Chinese economy since the 1970s. Earlier growth projections by Morgan Stanley revealed the Chinese economy would grow between 5.6% and 5.9% in 2020, with 5.6% being the worst-case scenario. In a related development, an earlier promise by the Australian Treasury to maintain a fiscal surplus for the 2020 financial year has become a challenge owing to the impact of COVID-19 on the economy. The possibility of ending the current fiscal year with a surplus is now a mirage rather than a reality for the Australian government.

 

Agitations by some economic analysts about sustainability of the Ghanaian economy should COVID-19 last longer than expected are expected to be mitigated by the strong gross international reserves (GIR) of over US$10billion, which is equivalent to 4.8 months import cover – and in excess of the 3.0 months import cover projected for the current financial year. The sharp decline in inflows from crude oil is likely to be off-set by the increase in prices of gold and cocoa on the world market. Currently, an ounce of gold sells at about US$1,682 while the telepathic understanding between Ghana and La Cote d’Ivoire has resulted in an appreciable increase and relative stability for the price of cocoa per tonne on the global market.

 

The necessary remedial measures put in place by the government of Ghana to bridge the financing gap in the 2020 budget include discussions with the World Bank to access part of its US$12billion facility intended to fast-track the treatment ofCOVID-19 related cases. Similar discussions are ongoing with the International Monetary Fund (IMF) to tap into its US$10billion rapid credit facility, and with other multilateral and bilateral partners across the globe. Another option is withdrawal from the Ghana Stabilisation Fund (GSF) to off-set any potential shortfall in the Annual Budget Funding Amount (ABFA).

See Also:  Petroleum receipts hit US$4bn

 

Economic Effect on China 

China remains a significant economy, and maintains a major manufacturing hub among global economies. Available data from the World Bank indicate China’s GDP for 2019 was US$14.2trillion. This represented 11.72% of the global economy. In absolute terms – that is, in terms of individual economies – China is the world’s second-largest economy after the United States of America (USA). The latter’s total GDP in 2019 was US$21.2trillion; and represented 17.5% of the global economy. Further, China manufactures one-third (1/3) of all goods required globally.

As a result, any socio-economic unrest in China is likely to have a ripple-effect on the global economy. Stated differently, socio-economic unrests in China are likely to destabilise economies around the world. The foregoing is corroborated by Agathe Demarais of the Economist Intelligence Unit (EIU), who affirmed global markets will remain volatile until the world gets a clearer picture of the potential outcomes from COVID-19.

The coronavirus pandemic’s devastating effects on twenty-four (24) of the thirty-one (31) provinces in China cannot be overemphasised. The affected provinces generate about 90% of China’s total exports; and contribute about 80% to GDP.  Statistics released by Mr. Tedros Adhanom, Director-General of the World Health Organisation (WHO), indicates demand for personal protection equipment (PPE) across the globe has increased over hundred (100) times; and the excess demand over supply has resulted in upward price adjustments of over twenty (20) times the normal price.

Further, the excess demand is likely to have negative effects on regular supply of medical products and equipment among global economies between four (4) and six (6) months. Globally, demand for the following medical products is high relative to supply: patient monitors, infusion pumps, syringe pumps, detection reagents, disinfection supplies, purifying respirators, gloves, masks, and face shields, among other significant medical products necessary for curing the COVID-19 pandemic.

While the rest of the world is struggling to come to terms with the coronavirus pandemic and how to possibly contain and curb its further spread within and across countries, China seems to have recovered from the social shocks – and has already begun economic restructuring. Stated differently, industrial activities have resumed in China while the Chinese government has announced a stimulus package of over US$344billion for fiscal measures, including assisting various businesses and bringing the Chinese economy back on track.

The overarching idea is to stabilise the Chinese economy, and enhance its competitiveness on the global market as soon as practicable. Chinese firms are currently encouraged to manufacture pharmaceutical and medical products such as nose-masks and gloves in large commercial quantities to meet increasing demand on the international market.

Zoos and some tourist-attraction sites in China have been re-opened to Chinese tourists. About 9,000 new businesses were established in February 2020 to manufacture medical products, especially nose-masks, gloves, and ventilators. Daily mask production in China has increased from 120 million units to over 160 million units, and most of them are sold to countries outside China.

BMW and other auto-manufacturing firms with factories in China have resumed operations. Available reports indicate all foreign-funded businesses in China have resumed operations – with 80% returned-employed rate and 70% business resumption rate. Overall, the Chinese business climate in particular and the economic environment in general are improving steadily. China’s ban on most foreign visitors to the country took effect on 28th March 2020. This initiative was intended to minimise importation of the virus, curb the spread, and accelerate economic restructuring efforts.

 

Effect on Politics

Indeed, the coronavirus pandemic has proven beyond reasonable doubt that it is no respecter of persons. For instance, in the Islamic Republic of Iran, Advisers to Messieurs Mohammad J. Zarif and Ali Khamenei were reported dead from COVID-19 – while fifteen (15) current and former top government officials, including the Vice President, have been infected. In addition, more than twenty-four (24) Members of the Iranian legislature have tested positive.

In the United Kingdom (UK), Prime Minister Boris Johnson and Prince Charles have been infected.  Some people in the United States have chided President Donald Trump for closing down the global health security unit of the United States Security Council, a unit founded to prepare the United States government for potential pandemic outbreaks. Critics believe the global health security unit would have envisaged the pandemic’s outbreak, and subsequently advised government on its prevention and containment to avert its catastrophic effect on the United States’ economy.

The COVID-19 pandemic has renewed and intensified protests in the administrative region of Hong Kong against the Communist Party of China (CPC) government; while Taiwan has raised concerns about its possible inclusion in travel bans by China. Meanwhile, the Communist Party of China – led by its General Secretary, President Xi Jinping, has dismissed a number of administrative leaders in some provinces affected by the pandemic. The dismissals followed poor handling of the response and quarantine measures in those provinces, and in Central China. Prime Minister Hun Sen of Cambodia recently visited China to express Cambodia’s solidarity and support for China’s fight against the pandemic.

 

Impact on the Global Economy

It is believed the effects of COVID-19 on the global economy will be more severe than the shocks associated with the Severe Acute Respiratory Syndrome (SARS) outbreak of 2002. Effects of the coronavirus outbreak on global supply chain have been projected to be in excess of US$300billion; and the disruption to global supply chain may last up to two (2) years. Earlier global economic growth projection for 2020 by the Organisation for Economic Cooperation and Development (OECD) was 2.9%. Later, the OECD revised the global economic growth projection for the current fiscal year to 2.4%; and down further to 1.5%.

Panic-buying has surged in economies affected by the pandemic, and in economies where governments have announced measures for containment including shutdowns or lockdowns. Reports indicate widespread shortages of medical and pharmaceutical products, food and other essential groceries relative to demand. The global airline industry is projected to lose US$113billion in revenue while the global economy is estimated to lose US$2.7trillion in revenue. The pandemic has affected China’s regular supply of machinery, chemicals and communication equipment to the European Union, United States, Japan, Vietnam, Taiwan, and Korea. Shortages in supply of medical and pharmaceutical products relative to demand are resulting in price-hikes, and causing inflation in some economies across the globe.

Spiritual Interventions

Some global leaders have taken steps to seek the intervention of the Supreme Being in their fight against the Coronavirus outbreak. In the United States, 15th March 2020 was declared a National Day of Prayer by President Trump’s administration. The objective was to implore all Americans to pray and seek God’s healing hands on the nation in the presence of coronavirus. On 25th March, 2020, President Nana Akufo-Addo’s government, through the Ministry of Chieftaincy and Religious Affairs, declared a National Day of Fasting and Prayer for all Ghanaians to seek God’s divine favour in fighting against and ending COVID-19 – a single virus believed to have caused the greatest socio-economic disruption in human history.

Many were those who underestimated the propensity and magnitude of the coronavirus’s effects on social and business activities across the globe. Today, it is staring in the face of all and sundry. The onus lies on each and every one of us to find a lasting antidote to, arguably, the most devastating pandemic ever encountered on planet Earth. Undoubtedly, the world requires concerted efforts and holistic approach to curb the menace; and to halt the carnage inflicted on global economies by the predatory coronavirus.

The writer is a Fellow Chartered Economist & CEO of EBEN Consultancy

Email: ebenezer.ashley@gmail.com

Website: www.ebenezerashley.org

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