The coronavirus pandemic has not only created a world health crisis, but is also affecting national economies and societies to their core. The impacts will vary between countries. However, there are few doubts that Covid-19 will create cascading effects on a global scale. The financial impact of coronavirus will be felt for years to come.
Financial Impact of Social Distancing
The number of confirmed cases of Covid-19 continues to increase daily. There are currently 6.5 million cases worldwide, and more than 380,000 deaths due to coronavirus. The U.S. has become the epicenter of the outbreak. It now accounts for nearly 1.9 million cases and 108,000 deaths. This has put an incredible strain on the American health care system and front-line workers.
The federal and local governments have enacted measures to contain the virus. In an effort to limit person-to-person contact, leaders have enacted social-distancing protocols. Following the example of previous epicenters, schools and businesses announced an eight-week quarantine. These measures are designed to keep people safe. However, they come at the expense of economic activity. Business closures, widespread layoffs, and stay-at-home orders have curtailed consumer spending and overall economic production.
Federal Government Relief for Workers
While some people are ‘essential workers’ or allowed to work from home, others have not been so fortunate. Smaller businesses have shut down, leaving their employees with no income. There is no clear timeline of when economic activities will fully resume. This could spell disaster for the 78% of Americans who live paycheck to paycheck. The United States Unemployment reached a staggering 14.7% as nearly 36 million people are out of work. There are an additional 3 million people who have filed for federal benefits.
Congress quickly responded by passing the CARES Act to offer immediate economic relief. It provides funds for workers and industries until everyone can return to work. As part of the $2 trillion relief pack, every eligible adult received a $1,200 stimulus check to stave off the financial impact of coronavirus. The Senate is currently debating a second measure worth nearly $3 trillion. If passed, this would mean an additional relief payment for workers who qualify.
Long-Term Economic Effects
According to the Congressional Budget Office, lawmakers expect the coronavirus to reduce economic output by 3% over the next decade. When adjusted for inflation, this equates to approximately $7.9 trillion dollars. The energy and transportation sectors will be the hardest hit since people are no longer traveling. The federal government will need to reconsider policies to cope with reduced production and output. Therefore, we must find new ways to stimulate the economy and manage the national debt.
What this means for the individual worker is that we must adapt to the new social order. For example, many people are turning to the internet to help them supplement their income. In the digital age, there are endless opportunities to make money online. Even as a teacher, I am finding new companies and platforms that offer remote classes. I am now able to connect with students and clients around the world, creating new sources of income I had never imagined.
What the coronavirus pandemic has revealed is that people are far more connected than we realized. Much about the future and these economic projections remains uncertain. However, one fact remains very clear. The danger of Covid-19 is that it exploits just how interconnected the global economy has become.