Coronavirus Is A Trap!
It’s Causing Big Economic
Crisis Than Health Disaster
(M.Javed Naseem)
The world is facing another horrible economic meltdown because of the Coronavirus or so-called Covid-19. Businesses are closing out; people are losing jobs; working class is not making any or enough money to make both ends meet. For millions of people around the world, it is getting more and more difficult to put bread on the table and feed their children. Families are separated because of ban on travelling and social-distancing. Government help is limited and temporary and is not for all people. So, it’s like a curtain raiser to the Doom’s Day!
There are plenty of views on this subject -- some pro and some con -- but they are not very encouraging. On the contrary, they are scary. Uncertainty and fear are gripping people while those (in power) who are responsible for your safety and well-being are busy spreading false news or disinformation to implement their own agenda. It’s chaotic! You are living in a Police State with no rights, always fearing for the worst. Corona has certainly created more hunger, anxiety, stress, financial problems, job-loss and even deaths.
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Small Businesses, Employees and workers are
suffering financially but all banks and credit
card (cashless transactions) promoters are
making money in fees.
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Surprisingly, Coronavirus has given a big boost to «Go Cashless» campaign. Promotors are not concerned about our health. They are just pushing their own agenda.
While virtual euros and dollars are still a ways off, the shift in attitudes toward real cash brought on by the pandemic is unlikely to be reversed. The pandemic is propelling a shift toward a cashless society in ways that no other single event ever has. Experts say that’s not necessarily a good thing.
According to a New York Times report, there is no medical evidence that cash transmits the virus. Nonetheless, “perceptions that cash could spread pathogens may change payment behavior by users and firms,” the Bank for International Settlements said in a recent study on the effect of Covid-19 on cash use.
Visa reported a surge in contactless payments for basic items in Britain after limits there were lifted and a 100 percent increase from a year ago in the United States. Visa said it had also worked with governments in Greece, Ireland, Malta, Poland and Turkey to raise contactless payment limits in those countries.
In the United States, 40 million customers went online for groceries in April. In Italy, where cash is king, the volume of e-commerce transactions has surged more than 80 percent, according to McKinsey & Company. China’s central bank sterilized bank notes in regions affected by the virus. And governments from India to Kenya to Sweden, as well as the United Nations, are promoting cashless payments in the name of public health.
Cash is not going to disappear anytime soon, but it will continue to decline, and Covid is accelerating that trend. Some big American businesses have gone cashless already, and that includes Walt Disney Co./Disney World, Amazon, Starbucks, Shake Shack, Sweetgreens, etc.
Those dynamics are creating a golden moment for credit card companies, banks and digital platforms, which are capitalizing on the crisis to advance the cashless revolution by encouraging consumers and retailers to use cards and smartphone apps that yield lucrative fees. In Britain alone, retailers paid 1.3 billion pounds (about $1.7 billion) in third-party fees in 2018, up £70 million from the year before, according to the British Retail Consortium.
Negative Economic Impacts of Coronavirus
According to The Brookings’ research, a startling indicator of the economic impact of COVID-19 is that unemployment rates reached the highest level since the Great Depression in April. As a result, claims for unemployment benefits have risen dramatically, though millions of people who have lost their jobs have been unable to apply or have had trouble applying for this benefit. Yet these figures do not reveal the extent to which households are struggling financially as a result of a COVID-19 related job loss. During the COVID-19 pandemic, unemployment reached historic heights with more than 40 million unemployment benefit claims filed—even exceeding the unemployment levels during the Great Depression
Impacts of COVID-19 on job loss
The survey found that 24 percent of respondents lost a job or income due to COVID-19. Most of these job or income losses were due to being furloughed or experiencing reduced work hours. However, these job and income losses were not experienced equally. Hispanic, low-income, and young individuals (between the ages of 18 and 24) had the highest rates of job and income loss compared to other racial/ethnic, income, and age groups.
UNIDO Report
United Nations Industrial Development Organization recently issued a brief. Here are some excerpts:
Widespread economic losses
The economic crisis unleashed by the outbreak of COVID-19 is hurting economies, regardless of income level. The most recent data from UNIDO’s seasonally adjusted Index of Industrial Production (April 2020 vs December 2019) indicate that both lower- and upper middle-income countries have been significantly impacted by COVID-19.
Economic losses are not correlated to health impacts
Recent data from the Centre for Systems Science and Engineering at Johns Hopkins University show that the spread of the pandemic in terms of case numbers and deaths is quite asymmetric across countries. Sub-Saharan Africa, for example, one of the poorest regions in the world, does not seem to have been severely impacted by COVID-19.
A study finds that the direct losses of the COVID-19 pandemic associated with illness and mortality are lower than the indirect losses caused by the crisis. Many countries are experiencing a recession, even though COVID-19 has not had a serious effect on them in terms of health.
Industrial production deteriorated
Industrial production across the globe deteriorated further in April 2020 compared to March 2020. It continued declining in 90 per cent of the countries included in our sample, with an average drop of 15 per cent within one month. Monthly reductions were further observed in India (- 55 per cent), North Macedonia (- 35 per cent), Malaysia (- 34 per cent), Turkey (- 33 per cent) and Slovakia (- 32 per cent). Countries that registered an increase in industrial production were Senegal (+ 9 per cent), Canada (+ 7 per cent) and Singapore (+ 4 per cent).
Manufacturing in crisis in many countries
All manufacturing industries were affected by the crisis over the period March 2019–April 2020. The share of countries that experienced a decrease in manufacturing varies from 55 per cent (pharma) to 94 per cent (motor vehicles).
Trade losses for nearly all countries in March – April 2020
Over the period March – April 2020, trade trends closely followed those for industrial production. Forty-three out of 46 countries experienced a lower level of trade in goods. South Africa, India, Mexico, France and Italy are the five countries that suffered the highest reductions in trade volume over that period. Israel, China and Chile recorded an increase in trade. China further consolidated its path of rapid recovery.
UNIDO is piloting firm-level surveys in several Asian economies
UNIDO is piloting firm-level surveys across manufacturing firms in several emerging economies in Asia. The first round of the survey included seven countries and collected a total of 1,040 valid responses. It was implemented online between mid-April and early June in collaboration with governments, business chambers and other agencies operating in the participating countries.
The pandemic’s short-term impact differs widely across countries
The impact of COVID-19 in terms of cumulative incidences in these countries per 100,000 population differed considerably across the countries surveyed. While Pakistan and Afghanistan reported over 80 cases per 100,000 population, Thailand, Cambodia and Viet Nam had fewer than five cases. These differences are also partially reflected in the share of firms that stated that more than half of their employees were unable to work during the survey period.
Firms in Afghanistan and Pakistan were affected more heavily than those in Thailand and Viet Nam. Over half of the employees of a very large share of firms in Malaysia and Mongolia were also unable to perform work, indicating that the actual number of COVID-19 infections was not the only factor at play. On average, more than one-third of the firms surveyed claimed that at least half of their workforce was unable to work.
The prospects for profit and job growth are equally gloomy
The results on firms’ expectations about future profits and employment growth are less dispersed across countries, and portray a gloomy picture. Half of the firms surveyed expect a drastic decline in company profits (50 per cent or higher) for the year 2020. Moreover, 20 per cent of firms stated that they had to lay off employees or are planning to cut one quarter or more of their staff. The largest share of firms expecting massive cuts both in terms of profits and employment is in Mongolia and Afghanistan.
Not all industries are equally affected
Firms in the textile, apparel and leather industries tend to anticipate the largest plunge in profits and jobs, while firms in the chemical, plastic and rubber industries expect below average decreases. The basic materials industries also expect their profits and employment to be hit hard. In the furniture, recycling and printing industries, a large share of firms is anticipating a serious decline in profits (54 per cent), but only 16 per cent expect that they will be forced to announce drastic job cuts, which lies below the average share of firms included in the survey. Similar trends are observed in the machinery and transport equipment industries.
Firms are calling for tax cuts to respond to the crisis
The vast majority of respondents participating in the UNIDO firm survey stated that reductions in taxes and rent or in utility costs are measures they would applaud. The share of firms in favour of tax reductions ranged between 39 per cent (Mongolia) and 76 per cent (Afghanistan); the share of firms calling for reductions in rent and utility costs varied between 32 per cent (Mongolia) and 63 per cent (Afghanistan), as illustrated in Table 2. This result is consistent with the findings of the World Bank Survey monitoring COVID-19 impacts on firms in Ethiopia, with the peculiarity that the majority of Ethiopian firms consider tax payment waivers to be the most appropriate policy measure to help them cope with the challenges the pandemic has brought.
The effectiveness of fiscal measures
The UNIDO firm survey (covering Malaysia, Mongolia, Pakistan and Thailand) also asked firms to indicate how useful the support measures provided by the government have been. Not surprisingly, direct financial support was considered the most beneficial support measure (72 per cent in Mongolia; 77 per cent in Pakistan; 73 per cent in Thailand). This sentiment is in line with a more general trend. Supporting wage payments appeared to be considered particularly effective, while tax deferrals were found to have the least impact on firms’ cash flow.
Larger manufacturing firms seem to be the primary beneficiaries of government support
The results of the UNIDO firm survey also highlight the importance of government capacity for swift and effective responses to shocks. We find that the average share of firms benefitting from government support measures or stimulus packages ranges from around 10 per cent (Afghanistan and Viet Nam) to 50 per cent (Malaysia and Mongolia). Overall, larger firms were more likely to receive support than smaller ones, which in “normal” times already tend to be more vulnerable and face more difficulties in accessing finance. A clear exception was observed in the case of Malaysia, where nearly 70 per cent of small firms surveyed received some form of support.
(Courtesy: UNIDO)
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