What will be the economic impact of COVID-19 (and should we care)?
Mass layoffs and prolonged unemployment are associated with income inequality growth—which correlates with increases in suicide rates.
Data from studies show income inequality maps closely to the rate of suicides among working-age adults. Not only do mental and substance use disorders stem from economic hardship, they are also known drivers of lower productivity, increased healthcare costs, and higher mortality.
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There'll likely be a clinically relevant increase in numbers of people with anxiety, depression, and engaging in harmful behaviours.
The 2003 SARS epidemic (involving an illness similar to the 2019 coronavirus) was associated with a 30% increase in suicide in those aged 65 years and older; around 50% of recovered patients remained anxious; and 29% of healthcare workers experienced probable emotional distress.
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Past catastrophes that have led to huge unemployment have consequently led to increases in suicide.
In 2008, the Great Recession ushered in a 13 percent increase in suicides attributable to unemployment with over 46,000 lives lost due to unemployment and income inequality in that year alone.
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The world economy is facing its most severe challenge of the post-war period.
Unlike the 2008-09 global financial crisis, during which a few emerging markets (like China and India continued high growth and pulled the world economy along), the coronavirus pandemic is damaging worldwide— eliminating the option of an export-driven recovery for any country.
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Unemployment insurance claims in the US have soared to their highest level ever.
Unemployment insurance claims in the US have soared past three million, a record-breaking number that far surpasses previous highs. This figure shatters the Great Recession crest of 665,000 in March 2009, and the previous record high of 695,000 in 1982.
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China has recorded its first official year-on-year decline in economic output in over 40 years—a warning sign for the rest of the world.
GDP in the first quarter plunged 6.8% year on year (as of April 2020), according to the National Bureau of Statistics. The contraction in China, the engine of global growth for the past 2 decades, is the starkest economic sign of the damage caused by the pandemic.
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Disruptions to supply chains are causing shortages of drugs that are needed by people
On 27 February, the US Food and Drug Administration (FDA) released a statement saying the US was experiencing its first drug shortage directly related to the COVID-19 pandemic. The FDA has a list of 150 prescription drugs drugs facing shortage risks.
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Oil prices—which are tied to geopolitical stability—have tumbled in the wake of the COVID-19 pandemic.
As a response to the lockdowns in Europe, global stock markets plunged and oil prices tumbled, losing a third of their value – the biggest daily rout since the 1991 Gulf War. A three-year pact between Russia, Saudi Arabia and other major oil producers has already collapsed.
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The coronavirus pandemic will likely lead the world to face its worst financial crisis since the Great Depression.
The International Monetary Fund projects global growth in 2020 to fall to -3 percent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression.
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Nearly 60% of Americans have lost hours or pay, been laid off, or closed a business
In a survey by Bain, it was also shown that 31% of Americans have seen their hours or income reduced, 18% have been temporarily or permanently laid off, and 10% have had to temporarily or permanently close their business.
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Significant numbers of Americans have also seen positive or no impact to their work life.
According to the survey by Bain, 6% have seen their hours or income increase and 35% have seen no impact to their employment or income level.
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In April 2020, 44% of UK businesses expect to furlough at least 50% of their workforce—this could have huge, negative mental health effects.
BCC Coronavirus Business Impact Tracker shows the majority of firms (62%) have three months of cash in reserve or less, and 32% of respondents to the survey said that they were planning to furlough between 75% to 100% of their workforce.
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Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter of 2020.
This is because of shutdowns to combat the 2019 coronavirus, leading to an unprecedented 50% drop in gross domestic product. Psychologists note that losing a job often feels like losing a loved one—so this economic damage is doing financial and psychological harm to people.
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Research by the CFN shows up to a million firms will run out of cash by the end of April 2020, making around four million people jobless.
According to the Corporate Finance Network, which assessed the finances of some of its 12,000 clients, 18 % would not be able to access government support and would collapse within four weeks from the date of the announcement (1st April 2020).
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Some industries have received an economic boost from the novel coronavirus pandemic.
In the United States, the pharmaceutical, mobile and streaming, fitness apps, teleconference apps, gold and sanitary products industries have all received a boost. For example, Zoom Communications has seen its shares soar by 11% as multiple businesses switch to remote work.
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Prolonged lockdowns and economic strain can lead to civil unrest—and the novel coronavirus lockdown has already led to some.
April 2020 anti-lockdown protests in the US have erupted. In Michigan, thousands of demonstrators created a traffic jam on the streets around the State Capitol in Lansing, saying restrictions to prevent the spread of the virus were dooming small businesses.
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Supply chain disruptions are leading to shortages of personal protective equipment for healthcare workers—making containment harder
Since the COVID-19 outbreak, prices have surged. Surgical masks have seen a sixfold increase, N95 respirators have trebled and gowns have doubled. Supplies can take months to deliver and market manipulation is widespread, with stocks frequently sold to the highest bidders.
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The travel industry, which accounts for millions of jobs, has been hit particularly hard by the novel coronavirus pandemic.
In 2018, the travel and tourism industry accounted for 319 million jobs worldwide. Most airlines have cut their flying capacity by at least 75% and announced widespread staff redundancies. Flybe, a UK regional carrier, was one of the first airlines to collapse due to this crisis.
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International tourism—and the communities that depend on it—has taken a massive hit.
The United Nations World Tourism Organization (UNWTO) estimates international tourist arrivals could decline by 20% to 30% in 2020. This would translate into a loss of USD 300 to 450 billion in international tourism receipts.
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The combination of job losses and health worries is causing people to suffer increased mental health and substance abuse issues.
A US national survey by McKinsey illustrates widespread distress—with 74% of respondents being anxious or depressed, or both, due to job reduction or loss. And 1 in 5 reported taking prescription drugs for non-medical reasons.