How the coronavirus is causing a market crash
Investors are expecting potential global recession because of the coronavirus as it is simultaneously destroying the demand and supply. No one really knows what is going to happen with the coronavirus as far as economies and businesses are concerned. World markets are more afraid of the infection as they record historic losses.
This virus is going to wreak havoc on economic growth. Recession 2020 is looming and financial markets are behaving very much like 2008. It’s now affecting almost all sectors of the market. Economic experts have said that the falling oil price is not encouraging as it is a sign of weak economy amid fear of the disease as consumer buying power is drying up.
All countries rely on China’s manpower and manufacturing ability. China is the world’s factory, they have 2.8 million factories which is 10 times bigger than the United States. Of course, if they took a hit, then the world is also going to be affected. Another big factor in the drop of economy is an oil price war between Saudi Arabia and Russia. The world economy is slowing down which manifests all the failures of the globalization.
Since the crisis did not originate in banks, so it did not directly hit the nerve centre of modern market-based economies – payments and settlements systems.
In a fresh Financial Times article, Mohamed El-Erian has suggested whole-of-governments approach to control the situation. To stop the circumstances from exacerbating, specific and targeted measures should be taken to create a sustainable economic floor, he said.
Radical measures should be taken to contain the virus including mass coronavirus testing and treatment should be initiated, the economist suggested.
Mohamed El-Erian said true productivity-enhancing reforms should be pursued to boost growth, rather than overly relying on actions of the central banks.
“Lastly, there must be supplementary international co-ordination to establish what collective actions can be deployed,” he wrote in the newspaper adding that the faster it was done, the better the economic turnaround would be.
The economic recovery will depend on more genuine and lasting steps, unlike the global financial crisis 12 years ago. The writer said low mortgage rates and energy prices will boost consumer purchasing power as well as economic revival.