Economic fallout of COVID 19 on Global Business

Economic fallout of COVID 19 on Global Business

  • 04-02-2020

Can a virus affect an Economy and Business? Well, if it causes a pandemic, like the Corona Virus, then there is bound to be a profound impact. The impact is more due to the reduced economic activity as a result of shutdowns, reduced movement of people, etc.

In this era of Globalisation, what happens in a country can have global ramifications. The events in the economically well-developed countries will have far-reaching impact globally. The pandemic has been severe in a few countries and in a few other countries it does not hold a big threat. Ironically, the impact of the pandemic on business can be high even in countries unaffected by the pandemic.

The following table presents the trends in imports and exports of select countries. A cursory glance will show that the global trade volumes have increased for all countries except Kenya. Countries like India and China have greatly improved their global presence. 

Sl. No

Country Exports as a % of GDP Imports as a % of GDP
1970 2018 1970 2018
1 India 3.8% 19.7% 3.9% 23.6%
2 China 2.5% 19.5% 2.5% 18.7%
3 United States of America 5.6% 12.2% 5.2% 15.3%
4 United Kingdom 21.8% 30.0% 21.0% 31.8%
5 Kenya 29.8% 13.2% 30.7% 23.0%


So, the economic fallout as a result of the COVID 19 pandemic will be dependent on the local as well as the international factors.

Major Global Impacts as a result of shutdowns

  1. Slump in International Trade: This is going to impact the countries that are dependent on the import of intermediaries for their manufacturing industries. Countries dependent on the export of perishable goods will be affected too.
  2. Decline in Crude Oil prices: Reduction in crude oil prices due to fall in the global demand is going to affect all the Oil producing nations.
  3. Travel restrictions, advisories: With restrictions on international travel, tourism has come to a near standstill. This will, for instance, affect the nations like Kenya in Africa, that are dependent on tourists from Europe and the USA.
  4. Major Trading nations affected: The major trading nations in the World are
  5. Likely online trade boom: With lockdowns in place in most countries, the online trade is likely to boom in those countries where it is fully permitted.

Now, we are seeing that there are no new corona infections in China and the lockdowns are slowly getting lifted. This might give a competitive advantage to China, as many other countries are still battling to contain the infection.

Hence to fully understand the impact of the pandemic on a country’s business, we can list out the following parameters:

Factors determining the impact of the pandemic on business

  1. Effectiveness of disease control and good medical infrastructure – If a country can manage the pandemic effectively and restore normalcy quickly like what China has done, the fallout may not be severe.
  2. Economic strength – The pandemic is likely to enforce industry shutdowns and closure of trades. Those countries that have the economic strength and reserves to tide over the tough phase will return to the growth path sooner than others.
  3. The sectoral composition of the economy – The economy of a country has three sectors viz., Primary – Agriculture, Secondary – Manufacturing and Tertiary – Services. The Secondary and the tertiary sectors are more impacted by the lockdowns.  
  4. Reliance on Tourism – Tourism is badly affected due to the travel advisories and bans against foreign travel by many developed countries.  A country is heavily reliant on revenue from imports from foreign tourism, they are likely to be impacted even if that nation is not affected by the pandemic
  5. Reliance on International Trade – Countries that are heavily dependent on import, export, and re-export are likely to bear the brunt of the lockdown in major economies.

To understand the effects of the corona pandemic it will be worthwhile to examine the counties based on the parameters listed above. An empirical model with these as the dependent variables can give us a measure of a country’s ability to withstand the impact of the Corona pandemic. A detailed research on impact of corona virus on global economy is available with us.

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