The outbreak of the coronavirus, which has hit the world economy, seems to have shaken the political and economic balance in many countries. The good news is that no continent has been plunged into crisis following the collapse of the Middle East and North Africa (MENA) financial system. Just-in-time economies have become popular in countries such as the United States, Germany, France, Italy, Japan, and the United Kingdom.
When assessing the potential impact of coronavirus on our economy, it is important to focus both on the virus’s epidemiological profile and on how businesses, consumers, and governments can respond directly. Consider how the impact of CO VID- 19 can affect families, small businesses, and communities, and how policymakers could design policies to mitigate negative impacts. This can highlight the profound impact COVID-19 has on the ability of small businesses to meet basic needs such as buying food, paying family mortgages, and staying in business.
With America’s GDP slumping to a record low in the second quarter, here’s a look at what the economy is expecting on the other side of the COVID-19 nightmare. The global economy has entered a recession that has the potential to turn into a depression. If it takes two weeks to reach the unemployment figures that took six months during the 2008 crisis, we are likely to face a global recession that could bring some projections to 10% loss or more of GDP. As the disease spreads to different areas and local epidemic issues rise, the world could be in a rolling recession. Many of these changes will be accelerated by the economic dislocations caused by the pandemic that will likely change the future composition of GDP.
Impact of Coronavirus on Businesses
Using recent data, we now examine the impact of COVID-19 on small business owners.
Small businesses that enjoyed steady employment and wage growth before the coronavirus pandemic struck have seen a change in the situation; the annual survey of 1,000 small business owners in the US shows a sharp decline in jobs and wages for small and medium-sized enterprises. The survey results also show geographical differences, with the impact more dramatic for businesses in the West, while less so in the Midwest. Overall, the losses were distributed among demographic groups and types of companies, and some groups were more affected than others, such as socially distanced companies and small businesses.
Supply and Demand
The virus will not only affect supply, but some sectors of the US economy could also experience a decline in demand and a sharp drop in revenue, with a general effect on the economy. A significant drop in revenue will have a trickle-down effect in all economies as companies struggle to adjust their business strategies in preparation for an economic downturn.
Uncertainty about the duration of the virus’s protection measures makes it difficult for small businesses to cope with potentially weeks of revenue losses that could affect their ability to operate. Studies have shown that postponing the start of business activities, such as the purchase of equipment or the installation of new equipment, can have a negative impact on small businesses. Many scientists have advocated a complete rethink of the global economy, but this scenario is harder to predict.
What we do in the next 12 to 18 months and what we go through and ultimately leave behind after the COVID 19 crisis will be very important. Are we leaving one world or another behind for future generations, or are we being left behind by them? Labor markets remain precarious as the economy struggles with the second wave of the coronavirus pandemic, and even the modest progress made could be lost when another wave comes. After the pandemic, the global recession, which is expected to be worse than 2008, will create an opportunity for people to become entrepreneurs in the form of bygone times. Companies still face uncertainty about the economy’s condition as the third wave hits and are continuing to have significant revenue impacts. Virtually all business owners, however, believed the virus’s effects were widespread.
Although there is currently no way to know whether a business closure will be permanent, months of inactivity can have an impact on sales, profits, employees, and businesses. Small businesses are using the lifeline: one in three small business owners say they have significantly reduced their overheads since the pandemic began by making efficiency savings. Nearly 85% of respondents used the wage protection program, which allows them to strengthen their business during a downturn and keep their employees for the expected upturn.
While there is short-term financial relief that could help small businesses, some business owners may not reopen until the end of the month or even early next year. While hurricanes and viruses can affect rich and poor people alike, prolonged economic disruption from COVID-19 will disproportionately affect those with a smaller cash buffer and affect demand from small businesses. Although much has been said about the impact on small, local businesses, decentralized supply chains are likely to be even worse affected. Policymakers responding to COVID’s impact on small businesses could focus on those smaller companies that normally have the least liquidity.
Targeted facilitation for small businesses in areas with limited liquidity and access to credit is designed to ensure a minimum level of service, minimize supply chain disruption and avoid credit events that could spread throughout the economy. It is vital to understand who will benefit from a given aid measure and to prioritize a strategy that concentrates aid resources on families and businesses that are most economically affected and financially vulnerable.
Limited mobility in municipalities will have a significant impact on the ability of small businesses to serve their customers. Declining mobility within municipalities, especially in rural areas, is accelerating the growth of online spending and impacting demand from smaller businesses.
Business’ COVD 19 Response
The response to COVID 19 is hampered by previous decisions that have weakened economic policy and infrastructure. During the global financial crisis, short-sighted fiscal consolidation hampered debt management and deleveraging. This would mean that we would have the same problem of dealing with future health and economic crises.
The Future of the Economy after COVID-19 Pandemic
The pandemic and subsequent recovery will accelerate a trend that has undermined middle-skill - and at the same time highly skilled - jobs over the past two decades and contributed to rising income inequality. An economy that picks up on this accelerating trend and plans, rather than resisting its effects, will most likely be the one that performs better in a reinvented future. The massive green stimulus will revive the economy, create millions of jobs, and drive the development of a sustainable post-economy - a consumer economy that serves the planet for its well-being. We will have one last chance to rely on these sectors to create jobs, generate economic growth and provide a better future for our children and the future generation.
The stakes for local business leaders to get the economy back on track are high. Understanding how the pandemic is hurting the US economy at the state - and local - level, where it is doing the most damage, is the first step in reshaping a more resilient economic future. A lack of - or insufficient - action plan poses the greatest threat to the long-term health of our economy and its future. This is a grim economic scenario, but it could be worse - the pandemic could produce a greener economy. This would also mean that major economic and social changes could occur if there were a major economic collapse.