The world was still recovering from the 2008 global financial crisis when the novel coronavirus shook up the economy to its very core. The effects of coronavirus on the economy of the world are yet to get worse as the aftermath of the pandemic hits the financial well-being. The global chains are disrupted and have gone beyond pharmaceutical productions. The second shock that will affect the economy in the long-run is the demand sector. As people around the world are quarantined and the government has to provide necessities to everyone at their homes, spending has drastically collapsed. The great plunge in oil prices will also have some serious effects on trade. The most feared risk is the shut-downs of small and medium-sized businesses that will result in a tremendous slack of GDP.
The response of the developed countries to the sudden COVID-19 crisis was weak which led to a frail start. Now, most of the governments, businesses, and households are in debt and the policymakers are gradually losing their trust in trade and investment systems. The presence of the virus in our lives is uncertain. There is a great chance of this virus to re-emerge or become a seasonal disruption unless an effective treatment is discovered. The only way to do that is global cooperation and correct leadership. Countries that successfully handled the coronavirus like China and South Korea can advise practices to fellow nations. And countries can exchange spare resources like medical personnel, masks, respirators, etc.
This will not only help to curb the coronavirus but will also give a push to the trade and cross-border investment. A freeze on some tax payments could be required to support small and medium-sized businesses, as would partial loan guarantees and other provisions to keep credit flowing.
The effects of coronavirus on economy have shown all the incompetencies in the health system, political arena, and economic coordination and it is time to fix those gaps learning from this pandemic.