Covid-19 likely to cost global economy $1 trillion this year
Few countries will be able to weather the storm as a result of financial woes
WHILE world leaders and scientists are grappling to come to terms with the containing, quarantining and research on a possible vaccine and treatment of the Covid-19, experts predict the economic consequences of the pandemic could cripple the global economy. The World Health Organization (WHO), has declared the outbreak of the coronavirus a global emergency and its spreading is explosive.
As if the tragic human consequences of the coronavirus were not enough, the economic uncertainty it has sparked will likely cost the global economy $1 trillion (R16.6 trillion) this year, the UN Trade and Development Agency, Unctad, said recently.
“We envisage a slowdown in the global economy to under 2% for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said Richard KozulWright, a director in the division on globalisation and development strategies at Unctad.
Launching the Unctad report recently as global financial markets continue to tumble over concerns about supply-chain interruptions from China, and oil price fluctuations among major producers, Kozul-Wright has warned that very few countries could weather the storm as a result of the financial woes.
The aviation industry is one of those to be hit hard. The effects of the coronavirus could wipe out up to $113 billion in worldwide revenues this year, the International Air Travel Agency, (Iata) said recently, a new blow to the aviation industry.
Empty jumbo jets arriving at deserted airports. Masked passengers disinfecting their own seats. Stonefaced airline executives huddling with US President Donald Trump could be seen in the US.
With the coronavirus outbreak continuing to spread around the globe, the aviation industry is being jolted. Airline stocks dropped sharply recently as investors around the globe reckoned with the prospect of cancelled flights, lost sales and substantial reductions in service – including United Airlines, JetBlue and Lufthansa – announced new route closings.
An industry trade group said the coronavirus could wipe out between $63bn and $113bn in worldwide airline revenues this year. The coronavirus has already sent stock markets into convulsions, rattled supply chains and forced companies to dust off emergency response plans.
Stocks in Europe recently plunged with the S&P 500 falling more than 3%.
But the abrupt decline in global air travel suggested that the economic impacts of the outbreak may be entering a more disruptive phase.
David Clark, the general manager of Freewheel, an advertising company owned by Comcast, flew to Kennedy International Airport in New York recently after attending a meeting in Cancum, Mexico.
Clark, a regular business traveller, said his flight was almost empty and that both airports seemed quiet. He said he might not fly again for months. “It was a surreal experience,” Clark said, adding that he was left wondering are the airlines going to be fine. It was almost 20 years since the aviation industry faced such an existential threat.
After the terrorist attacks of September 11, 2001, global air travel plummeted, and it took years for airlines to fully recover. Today there are worries that the coronavirus could have a disastrous impact.
“At the end of last week, we started seeing very sharp declines,” Garry Kelly, chief executive of Southwest Airlines, said on CNBC. “It has a 9/11like feel.”
The aviation industry was already grappling with the worldwide grounding of Boeing’s 737 Max which has been out of service for a year after two deadly crashes. Losing that one plane sapped some airlines of expected growth, forced them to cancel thousands of flights and resulted in billions of dollars in losses.
The more fundamental issue posed by the coronavirus – that large swaths of the travelling public may simply stay off planes for the foreseeable future – is a far greater threat.
Although still in its early stages, there are concerns that prolonged disruption could do lasting economic damage. Commercial aviation, like the internet, is part of the connective tissue of the global economy.
“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” said Alexandre de Juniac, the head of the International Air Transport Association, which forecast the potential revenue drop of more than $100bn.
The rapid shift in fortune is “almost without precedent,” he said. On social media, travellers shared images of planes devoid of passengers. Others posted photos of empty airports and tarmac workers wearing full-body protective gear in major hubs like New Delhi, Zurich and Istanbul.
South Africa has recorded 116 coronavirus cases, prompting fears that more could be witnessed in coming weeks and months.
On Sunday, President Cyril Ramaphosa convened an urgent Cabinet meeting to discuss a roadmap and urgent measures to address the effects of the pandemic.
Some of the measures include schools closing yesterday until the week after the Easter holiday; a travel ban on nationals from the EU, China, South Korea, US, Iran, UK, Italy and all visas granted to these nationals have been cancelled; 72 points of entry into South Africa, 35 land borders and two sea ports being closed as from March 16; gatherings of more than 100 people and visits to prisons cancelled for 30 days; and shopping malls intensifying hygiene measures.
Many annual events on the government’s calendar have been cancelled.
Gozhi is the managing director of Spin Africa Media and the publisher of the Transport Tribune, Business Tribune, Women Achievers and the Tribune Medical Journal.
A MEDICAL member in protective clothing takes samples at a testing drive-in station for the health and hospital professionals where people can get tested for the novel coronavirus disease (Covid-19) directly from their cars, in Espoo, Finland, yesterday.