The current Coronavirus pandemic has the world falling into a period of temporary economic decline. This causes trade and industrial activity to be reduced, generally identified by a fall in GDP (Gross Domestic Product). This is also known as a recession.
During a recession, there is a decline in economic activity. Our current recession is triggered by global lockdown as governments intensify restrictions on businesses. After the lockdown, people will be less disposed to walk into crowded places. This will have a cataclysmic impact on how business used to operate.
Not all businesses are privileged enough to enable employees to work from home. Businesses that don’t provide essential services are at a standstill. This results in tremendous layoffs and millions of people are forced to claim unemployment benefits. Global bankruptcy could leave every industry in a challenged state.
The world’s largest economy, the United States, is almost certainly in a recession. The second-largest economies have an expected growth rate of only 2%. (Resource: TS Lombard, the research firm)
Even by containing just the origin of the Coronavirus outbreak, it still affects international businesses as they have lost quite a percentage of consumers.
The current downturn presents an even more extreme event than the global recession that followed the financial crisis of 2008. Prevention strategies need to be taken.
The following Policy Actions are taken thus far:
When comparing our current recession to the Great Depression, we can already see some positive responses. The Federal Reserve keeps market functioning and avoids reductions in credit. Moreover, our financial system is currently more resilient than the Great Recession.
Above all, Congress has passed three packages that total over 2 trillion dollars. This packages helps to fund the health system, support households, and provide financial support to businesses to keep them going during this economic crisis.
Additional Policy Action is needed:
The health crisis needs to be controlled by stopping the virus. As long as there are health restrictions, the economy won’t grow.
Policy needs to take action against layoffs by funding new loan programs that will help small businesses maintain payroll. This will help keep employees connected to payroll even with limited hours. Help the more vulnerable community by supporting beneficiaries of these programs with donations and payments. This will provide the less fortunate with their basic needs.
Above all, Policymakers need to continue the above-mentioned programs even after the lockdown. Economic triggers need to be considered, such as state unemployment rates, health rates, etc. This will help to reactivate the economy
In conclusion, the recession that may follow after the lockdown is unavoidable. It has taken a toll on not only small businesses but the community, economy, and environment as well. We must help everyone in need as much as possible. Economic growth will only get back to normal if everyone plays their role in ensuring that economic damage is not even more lasting.