Yes. The greated concern is of the impact on employment and poverty.

Yes, real sector will be more impacted than financial sector especially retail and manufacturing.

Your question Piotr is tricky one and therefore we must start with financial sector first. Financial markets efficiently direct the flow of savings and investment in an economy and help production of goods/services. Financial and real growth interact and therefore its a complementary effect.

If one focuses on manufacturing sector by isolating industries that fight for resources with finance then in fact they get damaged more by financial booms (Pre AFC) Era. Now let me explain how I think impact of COVID 19 works out.

1. Both economic and financial problems will arise. example: 1) Fiscal deficits and higher debt will push most central banks to continue to use flexible monetary policies for a longer period (less control). 2). Worst affected would be retail and worst hit will be travel and tourism 3) COVID-19 is already disrupting supply chains(electronics,automotive). 4).Lets not forget the crash in oil prices is also hurting banks. 5) Bulk commodities will get hurt as China,India will reduce spending eg coal, iron 6) The Fed announced a huge cut back on its quantitative easing program this March. What it means? It affects credit markets as these funds would have actually passed to corporations/households.So in my view its too early to say what the effect on financial sector will be..wait at least 2 years or more.

Dear Sudip Debkuumar, thank you for the answer! Yes, I agree with you that it is too early to assess the impact of COVID-19 pandemia on the banking sector. I agree with you that at the moment we see only the growth of unemployment, the capital market reaction, then soon we will know the numbers of bisinesses which went into bankruptcy, and the impact on banking sector will come later. We will be able to assess the scope of losses not earlier than before the next two years... But I mean in my question that despite of all the negative consequences of the pandemia on banks, the banking sectors as a whole in many countries are safe. If there will be some failures, they will affect rather single banks, not the whole banking sectors. The regulatora did a lot during the lase decade to protect banks (Basel III and amendment, banking union, European Banking Authority, Financial Stability Board, many national regulations in many countries are only some of the examples). So they are strong enough to protect themselves or at least the prevailig part of the business. They are only intermediaries... On the other hand we have our real economies. And there are endangered branches of industry and services: tourism, hairdresssing and beauty, restaurants, cinemas and theatres, and many more). These sectors are not protected by any regulations or prudential standards. In my city the tourism and restaurants were one of the most important sectors. At the moment the streets are empty and restaurants are ciosed. So there is no possibility that only part of the restaurants will be affected (like in the case of the banking sector). All of the reistaurants and hotels are affected... even public communication suffers...

Hi Piotr. True Basel has improved Banks ability to face crisis better now as compared to 1997 or 2008 . But I feel that the obvious is not always the answer. Tourism has not been attributed to be the major driver in decades and only now we focus on it due to the Hospitality industry crisis. However in my part of the world 4-5 star hotels were selling off long before COVID 19 due to the huge capital gains they were making. Let’s also keep in mind that even now tourism accounts for only around 10% -11% of the total contribution to global economy.. But it’s a similar story nearly every where as you said, with empty streets, clear skies and no sound of an airplane overhead.

We must stay wait and see until this covid-19 is handled...we can analysis for now,,,cause it‘s crisis still “walk”

Dear Piotr, definitely the crisis will affect the real sector more than the financial sector (the cost of the real sector is higher than the financial sector)

The development of the current SARS-CoV-2 coronavirus pandemic that causes Covid-19 disease causes various effects, effects typical of the recession in the real economy. In some countries, the current pandemic crisis will trigger a deep economic crisis in the real economy. In many countries, the deep economic crisis will probably last only up to several months in an optimistic scenario. Unless it turns into a debt crisis of the public finance sector, then it will last longer. On the other hand, the situation on financial markets is mainly a barometer of social moods and the vision of these moods designed in the media. Only when the nervous and unstable situation prevailing in many markets, both in the real economy and in individual financial markets, including capital markets, currency markets, commodity markets, and securities markets, will it calm down, then greater stability and correlation with real economy also in the context of short-term analyzes. There are many analogies in this issue with the previous crisis occurring mainly in the sphere of banking, i.e. the global financial crisis of 2008, the sources of which I researched and described in the publications available on the Research Gate website. However, the current crisis is of a different nature. It is originally a pandemic crisis with virological sources, characterized by high unpredictability and, therefore, difficulty in applying to the analysis of this crisis models developed during previous crises. In addition, the financial scale of the anti-crisis social and economic policy instruments, monetary policy, fiscal policy, social policy, etc. used in some developed countries is historically the largest, larger even compared to the analogous measures used as part of anti-crisis measures implemented to limit the development of the global financial crisis in 2008 year. At present, it is extremely difficult to determine which factors will trigger a major economic crisis in individual countries in a few weeks or months, i.e. whether a pandemic crisis or specific interventionist measures have been used. Because it is difficult to diagnose which factors will prove to be the main sources of crisis in the real economy, so even more so to predict the situation on financial markets is also extremely difficult nowadays. This difficulty results mainly from new categories of risks that are currently emerging or are defined in the context of economic development, shaping the economic growth rate in the real economy and in the context of the functioning of financial institutions and the economic situation on financial markets.

Regards,

Dariusz Prokopowicz

A simple way of looking at it, is to look at a typical firm (micro) in a fictional economy to illustrate the impact or lack thereof Piotr Lasak . Take a fictional economy where mining as a sector accounts for 7% of GDP. The typical mining firm in that fictional economy has not operated since January 2020,. In other words, it has not sold anything. You could paint two scenarios; 1) where the typical mining firm paid salaries (either in full or reduced) and; 2) scenario where it does not pay salaries (highly unlikely).

That aside, you could then add manufacturing, assume manufacturing account for 15% of GDP and perhaps it operated at 20% capacity for a quarter or 2 quarters. Whichever way you look at it, even with simple back of envelope calculations, "main street" will take a big hit. Since wall street and by extension banking is a mirror of main street, expect collateral damage on the "mirror" as well.

The current situation have large impact on the world economy. The impact of Covid-19 will be more on the real economy instaed of financial economy, especially in the developed countries, reason being the developed coutries are based on capitilist economy. But the economy like India largly depends on the agriculture and the large population is also a demand forcing power.

It has the same effect on all sectors.

Financial markets have been known to be more volatile. It reacts to events after while the real economy will take time, after a lag. All the fiscal and monetary policies implemented by Govts have a more immediate impact on financial markets. If Govts stay united and coordinate their policies well, the impact on the real sector will not be as severe. The virus covid-19 is the world's No 1 enemy, it has diverted our attention from the US-China trade war. Trade is affected by self isolation but not by war.

Dear Piotr,

Though most stock markets (and oil prices) have nosedived recently, the transitory effects will have prolonged impacts on economies and companies’ earnings because of coronavirus pandemic.

This is also evidenced by the fact that the Fed decreased very recently interest rates to zero levels and the markets keep nosediving. This is an indication that markets are already far sighting and factoring the long-term impacts of current world events because of coronavirus pandemic. I am afraid, but current world events will have major impacts on countries and companies’ earnings, which will definitely led to many bankruptcies worldwide.

Prof. Dr. Mazin A. M. Al Janabi

Full Professor of Finance & Banking and Financial Engineering

EGADE Business School, Tecnologico de Monterrey,

Santa Fe Campus, Mexico City, Mexico.

I would like to add in further bankruptcy is an old Italian word which means broken bench and when a banker could not pay his obligations his bench was broken. So now the system is broken, The first signal of it was felt in 2008/09 and it was only the rehearsal the recent pandemic and its effect are real. The Covid-19 is a catalyst the reason for the problem is the broken financial system

What is the debt ratio to the GDP? What rate is needed for survival of the economy? What rate is the crisis indicator?

At present the debt to GDP percentage of USA is more that 90%. China is 48% and Japan is more than 300%. What will be consequences for non-payment of loans and mortgages in the near term when job erases, Won't it be the financial sector?

Dear Piotr Lasak ,

your question is very good for multi-hour discussion :-) (maybe something like that could be organized).

My take is that this crisis is definitely different than that one of 2008 and the real sector will be mostly affected. I am not (yet) afraid of a drop in demand, but I am very much scared to see a shift in supply (to the left) where the world economy would experience an economic 'shrinkage'.

One thing is for sure - this is an 'awesome' time to be a researcher because there are so many interesting topics and time will only bring even more interesting things to research.

Stay safe,

regards...

Yes, I think you're right in what you say. exactly like situation in Turkey.

Obviously, the real sector will be affected as well as the financial sector in this crisis. These sectors cannot be in isolation. Also we must only not think of economies in isolation. There are transmission mechanisms or spillovers that are likely to be experienced by other economies (especially developing economies). Hence global response to this crisis should be concerted to avoid negative effects on struggling economies.

Pienso como Albert Agyemang-Badu , no son sectores aislados. Pero yo encuentro una importante diferencia: Cuando cae el sistema financiero, o simplemente se tambalea, la economía real le sigue inmediatamente; cuando cae la economía real le sigue el sector financiero pero a más largo plazo, sobre todo cuando la caida es de la economía global

The coronavirus epidemic is becoming a major threat to the global economy and financial markets. More and more organizations are lowering their forecast for economic growth in 2020 for almost all economies in the world. I believe that the epidemic may affect the markets in the following areas - reduced business activity in China, reduced activity in local markets and stress in the financial markets.

Apart from the financial sector, the impact of the coronavirus epidemic is also evident in all other sectors. The decline in industrial production also continues due to reduced order volumes, low economic activity, declining transport, due to traffic restrictions, led to a decrease in oil demand, which reflects on prices, which fall to extremely low levels. Significant decline and losses are generated in the services sector, as lower consumer costs and imposed restrictions on business have a negative impact on retail, hotels, restaurants, aviation, the organization of cultural, sports and others. events.

In my opinion, the real sector will be hit as I see almost everyone in this discussion has in their say. Regarding the scale of the impact of the pandemic to the economy, rely mostly on governments of the world on the speed and readiness to minimize the spread of the virus and to contain the virus once it reaches a certain level (relatively speaking for each country since the characteristics of the regions affect the speed of the outbreak). The fact that the ones got hit pretty hard is the transport industry (due to the limitation of people movement, related to the social control and government policy to contain the outbreak), and hospitality sector for more or less the same reason as the transportation industry. If the government fail to suppress the infection rates, other industries in the real sector will be damaged as well because of more people on containment or limitation to relocate, any trans-action will be halted severely, business activity stop or even face a permanent closure as we've seen, fuel and energy consumption will decrease and banks will have trouble on their liquidity especially those whose are engage in financing a large scale project. Therefore the negative impact on the real economy will be severe and the worst part in my opinion, the pandemic killing the economy slowly but sure (except for the first two industry that I mentioned earlier). The financial market however seems to react differently. Of course perception of the economy plays a major role in the volatility of the market most of the time. But in some countries, IPO activity is increasing or at least decreasing in a very slow rate relative to the economic condition. This is because the confidence level in the capital market is still there. So yes the financial market might survive but the foundation of it, which is the real economy will be in recession. My question is what kind of correlation that can explain such a situation?

Certainly, there is a lot of research to prove this

It will definitely affect all sectors, especially the economic and financial sectors, and this matter, if it continues, will cause many problems

Thank you very much for your answers!

Though most stock markets (and oil prices) have nosedived recently, the transitory effects will have prolonged impacts on economies and companies’ earnings because of Covid-19 pandemic and health crisis.

This is also evidenced by the fact that the Fed decreased very recently interest rates to zero levels and the markets keep nosediving. This is an indication that markets are already far sighting and factoring the long-term impacts of current world events because of Covid-19 pandemic and the resultant health crisis.

I am afraid, but current world events will have major impacts on countries and companies’ earnings, which will definitely led to many bankruptcies worldwide.

The recovery from the economic impact of the Covid-19 health crisis will take lot of efforts and prolonged period of time.

Prof. Dr. Mazin A. M. Al Janabi

Full Professor of Finance & Banking and Financial Engineering

EGADE Business School, Tecnologico de Monterrey,

Santa Fe Campus, Mexico City, Mexico.

Current environment will definitely be going to make an impact on the Indian Economy equally as it is making an impact on the developed nation like USA, UK etc. Being an agriculture-based economy onus is more on government how they handle the situation of migrant worker otherwise it will dent the economy more than any nation of the world in post covid-19 era

Yes, in this time the more impact will be on economy of the country instead of the financial sector. More over the education sector will be more effected than other sectors.

Very good discussion by Dariusz Prokopowicz .

Dear Sujan Mahapatra,

Thank you very much and best regards,

Dariusz Prokopowicz

Thank all of you for the participation in the discussion! I agree that both of the areas, financial markets and reac economies are very strongly interconnected. At the moment there is very important question, what will be the condition of the banking sector after the COVID-19 pandemia? The logic is that the banking sector is crucial for providing the financial aid for the real economy. The stability of the banking sector is crucial for many industries, like tourism, cultural services, automobile producers and real estate... The financial support provided by banks will be a crucial determinant of the condition of the real ekonomy... Of course the role of taxpayers is/will be important as well.