When there is dusk there will be dawn. Economists are extremely optimistic and foresee opportunities in hindsight in such a grim and hopeless situation.
The coronavirus pandemic has a lot of dark sides. Around the world, people are still dealing with lockdowns due to different waves of coronavirus. In some African countries, people and dying from starvation and extreme poverty, there a mass exodus in India from the towns to the villages.
In some cases people get ill and die, the healthcare system is overloaded, healthcare service providers are exhausted due to a limited number of doctors and nurses in comparison to the rise in cases, in some countries, there is zero academic year, schools are still closed in some countries, employees are losing their jobs, companies are facing bankruptcy.
How the government is dealing with the coronavirus pandemic :
Stock markets are collapsing and countries have to spend billions on bailouts and medical aid like vaccination drive and infrastructure. For everyone whether directly or indirectly Covid-19 is a huge stress-out psyche, triggering our fears and uncertainties.
Historical human behavior in the pandemic situations
When we look into history whenever these kinds of situations arise there is always a silver lining in it. At the beginning of the 19th century, we saw the Spanish flu. After that rise in wages occurred due to a shortage of laborers. After world war II we saw there is development in science technology, agriculture, world peace, increase in people’s living standards,s and after the 2008 economic crisis we saw rapid development in the field of cloud computing.
The US Economic situation is steadily improving after the destruction occurred by the COVID 19 pandemic. This economic outlook is based on economic expert’s reviews of the key economic indicators, including GDP, unemployment, and inflation.
Analysts also see positive shifts in the areas of interest rates, environment, online booming business, oil and gas prices, jobs, and the crucial impact of climate change.
GDP: The total monetary or market value of all the goods and services produced in the country’s boundary within a time period.
U.S. Economic Scenario Right Now
At the beginning of March 2020, the U.S hit by the health crises and the repercussions were huge. It stopped 128 months of expansion, the longest in U.S. History. In this time period, the U.S witnessed a recession after the 2008 financial crisis.
In the first Quarter 5% decline in the real GDP. From this, it is now clear that coronavirus was a national emergency. Most businesses were shut down.
In the second quarter, the economy contracted a record high of 31.4% and the U.S never experienced a double digit GDP drop i.e.10% since 1947 according to the National Bureau of Economic Research (NBER).
In the third quarter of 2020 the U.S. witnessed an economy expanding by 33.1% but it was not enough to fill up the output lost earlier from the beginning of the crises.
In November the U.S hit by a second wave of pandemic again the unemployment rate skyrocketed to 14.7%. In this note economists suggested the government that economy can’t go back to the pre-pandemic era unless there is mass vaccination drive in the age group of people all over that country.
2020 Recession: It is a halt to the 128 months of economic prosperity since the 2008 economic crisis followed by the great depression, 33.4% expansion in economic growth can’t bridge the economic loss.
Pandemic is the 4th economic shock in the 21st century. U.S Federal policy says spend now, save later. Govt. could choose to respond differently. After the pandemic to recover from the economic downturn, the government has been borrowing a lot and spending more.
To keep borrowing costs down, the central banks of America, Japan, the EU, and Britain created new money of $4trillions. That money has Financed household income payments following millions of workers and bailout businesses.
Americans are great in spending money, while the office is now shifted to home, people are working from home and their savings are rising once the working ecosystem resumes to its normalcy they will spend more and the GDP grow eventually.
According to the Federal Open Market Committee, U.S. GDP growth is expected to contract by 2.4% in 2020. It is estimated to rebound up to a 4.2% growth rate in 2021 and 3.2% in 2022 and 2.4% in 2023 respectively.
Before the shutdown, the economy was adding 200,000 jobs every month. In April 2020 the U.S economy lost 20.6 million jobs due to the short downing of the nonessential businesses. After lockdown, the restaurants, bars, hotels, and the hospitality industry get shut down totally. People stop traveling. Restaurants rely on takeout and delivery options.
Retail merchants suffer a lot because the customers shifted to online mode. The unemployment rate remained double-digit till august 2020 i.e. 14.8% according to FOMC.
If the government is able to add 150,000 new jobs each month, the unemployment rate will decline to 5% in 2021. It will be 4.3% in 2022 and 3.7% in 2023 respectively and the economy will keep on expanding.
How could Covid -19 cause prices to rise
Inflation is when prices rise across the economy. In the pandemic, Joy Biden came up with the stimulus package of $1.9trillions intended to deal with the ill effects of the coronavirus. This economic benefit will provide economic support particularly to working-class households with lower incomes.
Its effects are felt in America’s already resurgent economy, inflation hawks fear higher consumer prices, sending ripples around the world. This stimulus package will also include benefits to the seniors, low-income households, unemployed citizens, etc.
The economist’s forecasted core inflation rate in 2020 is 1.4% and slowly it will rise to 1.8% in 2021,1.9% in 2022 and 2% in 2023. The federal reserve inflation will remain at 2%.
According to the Bureau of Labor Statistics (BLS), the U.S. added 916,000 jobs in march 2020 and it will reduce the unemployment rate to 6%. The Fed predicted the unemployment rate will fall to a healthy 5% in 2021.
The United States aims to accelerate its economic activity as a result of which the Fed cut down its benchmark interest rates range between 1.00% and 1.25% to a range of between 0% to 0.25%. The Fed promised to keep its benchmark rate at zero until 2023 until recovery was well underway.
As a result of the reduction in the interest rates to provide financial assistance to the financial markets with liquidity, thereby providing the banks and businesses with access to required funding to stabilize the economy and achieving employment and price stability.
Oil, Gas and FMCG Prices, Oil, Gas
During the Pandemic global oil demand got reduced due to the government’s restrictions on travel, as businesses shut down during this period the travel industry hit its all-time low.
The U.S. Energy Information Administration (EIA)predicts oil prices to average $43 per barrel in the fourth quarter of 2020 and $49 per barrel in 2021. U.S. oil prices will also rise in 2021 According to EIA‘s latest forecast average Brent oil price could increase to $183 per barrel in 2050.
This forecast does not take into account how the government is trying to increase the renewable energy production in order to check global warming.
The FMCG industry faces remarkable structural change as people stay at home. So consumption, health, well-being, and sustainability dominate the strategic agenda.
The World Economic Forum said climate change is the biggest threat to the economy and society. It causes US GDP to go down to 10% every year including extreme weather conditions like floods, hurricanes, rise in sea level, wildfires and melting glaciers, and other climate-related disasters causing economic damage of $150 billion in 2019 down from $186 billion in 2018.
Insurance companies every year pay a large sum of money in damage claims which is getting worse in each passing year due to extreme weather conditions. Fed asked its national banks to come up with risk management plans for natural disasters due to extreme climate change.
How pandemic leads to innovation
Covid -19 has boosted innovation to a new height. This is the most unfamiliar story regarding covid-19. The crisis is boosting innovation with the emergence of brand-new ideas and the application of existing ones in a surprisingly brand-new way.
This upsurge in innovation will bring good and bad. so what lessons can be learned for the past pandemic era. There is an opportunity for innovation to stay at the cutting edge.
In the Drone industries since the pandemic, the business is really taken off. Drone technology is quite been around for a while, but during a pandemic, it starting to realize its considerable potential. With social distancing is new normal, the health care system is now looking at drones to deliver a new and better way to deliver blood, medical equipment, plasma, cancer treatment, and vaccines, etc in a more efficient and productive way.
Every health care system on earth is suddenly trying to reconfigure itself to the new reality to stand the reach of the hospital to the new reality. Labeling close to the health care where patient life is more convenient and they have to travel less. In this way, they take less risk, and chances of infection are less in order to access the health care system in general.
In mid-2020 drone companies tied up with many consumer retailers like Walmart in order to deliver consumer goods to their doorstep through the drone.
In between mid-June to September 2020 drone technology delivered 100 thousand more medical products as many as the previous last 3 years.
To see the emergency and rising demand of the customers and health care system Govt issued licenses to the drone companies through a controlled air space to deliver healthcare products in a more efficient and productive way.
American regulators issued new guidelines to fly over people in long-range space in December. In this way, hospitals said they are predicting to see this kind of work in 10 years but now they are seeing it in just a year now.Covid-19 leaves its footprint in the field of Health care infrastructure, Pharmaceutical industry, and Science and technology, etc.
I am a girl who’s passionate about charts and numbers in economics and enjoy converting them to simple lines so that any layman can understand them easily.