Economies choke as pandemic hits

Governments struggling with coronavirus economic fallout

The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed.

Governments around the globe are laying out billions of dollars to stabilise their economies even as revenue from taxes seizes up.

The famous French cafes, along with restaurants and bars, will remain closed at least through May. France’s Finance minister Bruno Le Maire said the government is further deferring tax payments and extending shortterm unemployment payouts to support those businesses.

Hotels, restaurants, bars and cafes in Germany placed empty chairs in streets and squares yesterday to highlight the economic plight of the pandemic as business owners demanded more government financial support for the hospitality and events sector and a clear plan for when they can reopen. The first protest was on April 17 in Dresden and has been replicated in other cities.

In the US, factory orders have plunged and are expected to get worse, despite the nation being on lockdown for only the first half of

March.

Few industries have been harder hit than airlines, and the situation grows worse daily. Shares of Southwest Airlines have fallen almost 50 per cent this year, and it has by far the best performing stock among all major US airlines.

“Traffic is virtually zero”, and if it doesn’t improve by July, “we will have to prepare ourselves for a drastically smaller airline,” said Southwest Airlines CEO Gary Kelly.

The airline is burning through cash at “an alarming rate”, although Kelly didn’t give a figure. Southwest reports its quarterly results on Tuesday.

In Perth, planes owned by Virgin Australia, the largest airline seeking bankruptcy protection, have been prevented from leaving an airport.

The nation’s second biggest airline sought protection on Tuesday and Perth Airport says Virgin has significant outstanding payments due for airfield and terminal use. Virgin says the debt is a matter for Deloitte administrators and the airport.

Major US railroads began releasing quarterly numbers this week and they are dire. CSX withdrew guidance for the year and Union Pacific expects volumes to plunge.

Oxford Economics says withering rail traffic illustrates seizing business activity. Steel production was down 34 per cent through the first week of April, compared with last year, and that will grow weaker as investments dry up, wrote Oxford economists Oren Klachkin and Gregory Daco.

Data from the American Railroad Association shows that by industry, freight of vehicles and parts, coal, and metallic ores and metals have dropped the most, down 88 per cent, 36 per cent, and 25 per cent, respectively, in the week ending April 11.

Although there is a push to open car manufacturing plants, particularly in Europe, they remain closed in the US.

Japanese automaker Mitsubishi Motors anticipates a 26 billion yen ($400m) loss for the year. Previously, it had expected a profit of 5billion yen.

The auto industry is the pillar of Japan’s economy and the fallout is expected to be great, with the world’s third largest economy possibly headed to a recession.