Coronavirus (COVID-19) and Its Impact on the US Economy So Far

Posted by D&V Philippines
Mar 19, 2020
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Around the world, the Coronavirus disease (COVID-19) pandemic has upended our daily lives. The economic uncertainties surrounding the outbreak have already resulted in disruption in the lives of millions around the world. This week, we examine the Coronavirus’ impact on the economy so far.

Coronavirus impact on economy

The Black Swan Event of 2020

The COVID-19 pandemic has been one of the largest black swan events in recent years. 

A black swan, according to statistician Nassim Nicholas Taleb, is an unexpected and improbable event or occurrence that can result in massive economic, social, political, or cultural disruptions.

Related: Black Swan Scenarios: Your CFO and Business Risk Management 

In the case of COVID-19, a confluence of various events has brought about this problem: climate change, which resulted in the transformation of many dangerous diseases; cultural attitudes that pose a risk to public health and safety (e.g., China’s appetite for wildlife, which scientists suspect to have caused the outbreak); and the US government’s failure to act and prepare for the outbreak.

COVID-19’s Economic Impact

Coronavirus’ Impact on Financial Markets

In the US, the COVID-19 outbreak started a chain of events in late February that resulted in one of the worst weeks in stock market history. 

As fears of the outbreak and the economic uncertainties surrounding it reached the markets, most international indices have already shown signs of nearing bear market territory; that is, with a decline of at least 20 percent from a 52-week high. The S&P 500 index dropped 7 percent when the March 9 session opened, resulting in a “circuit breaker.”

On Sunday (March 15), the Federal Reserve from Washington slashed interest rates to almost zero, which should help consumers to borrow and spend. Nevertheless, The New York Times’ Jeanna Smialek opines that no actions by the Federal Reserve can fully offset the impact of Coronavirus, considering that its tools are not well suited to making up for lost productivity or helping employees who have missed their paychecks.

(For further reading: The Harvard Business Review published an incisive analysis on the possible impact of the pandemic on global economies this month.)

The Cost to US Businesses and Workers

American businesses and workers face a real and imminent threat aside from the spread of the Coronavirus: businesses shuttering, employee layoffs, and other eventualities brought about by the mounting economic damage of the epidemic.

From coast to coast, businesses that rely on large groups of people getting together, such as restaurants, hotels, and events management have been suffering losses. Cancellations have become the norm as more people take the necessary precaution against the spread of the disease by canceling events and practicing social distancing.

As reported by The New York Times, the turmoil in the financial markets have already spilled over to the real economy. Due to stock market losses, prospective clients of real estate brokers in Mountain View have backed out from million-dollar homes. 

In Seattle, a restaurateur in a neighborhood frequented by tech company employees has been forced to shutter his restaurants and lay off about 800 employees after most tech companies started working from home.

In addition to these businesses, the travel and tourism industry will definitely be among those that are hit the hardest, especially after authorities have strongly advocated for social distancing, which will result in more consumers staying indoors. 

 

As of this writing, we have still yet to see what the full impact of this epidemic will have on the US economy. We’ll find out how the economic disruptions will shape our future behaviors, much as how SARS transformed those in East Asia in the early 2000s. Ultimately, the extent of the transformation will depend on how fast we can contain the virus.

Once the outbreak is over, we will have to prepare for similar events to become a part of the new normal. To build resilience in our economies, we have to put pressure on both governments and private industries to do things differently, putting policies that protect people at the forefront.

Read Next: Working During the Coronavirus Outbreak: 7 Tools SMEs Can Use

Your CFO’s Virtual Partner

For companies to prepare for any eventualities, a robust financial strategy should be in place. Now more than ever, it’s important to get the right support for your CFO to boost their capability to make better business decisions. 

Read our free guide, Premier CFO Solutions to learn how D&V Philippines can be your CFO’s virtual partner. Through our wide array of finance and accounting services for CFOs, we can help you build scalable solutions that your business needs.

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