What are the possible factors that should be considered to explore the impact of COVID-19 on Financial markets and eventually on economy of a country.
To encourage discussion of the economic impact generated by the SARS-CoV-2 virus, and the control measures taken at the international level, we invite you to read the following article.
Economy or Health, Constant Dilemma in Times of Pandemic: The Case of Coronavirus Disease 2019 (COVID-19).
Journal of Pure and Applied Microbiology, 2020. DOI: 10.22207/JPAM.14.SPL1.07
Article Economy or Health, Constant Dilemma in Times of Pandemic: Th...
Social media could have been another factor which has been added in past few years having impact on economy.
Muhammad Ghafoor Ali yes right you are. Social media could have considerable impact. Thank you very much.
COVID -19 has the worst impact on the financial market. Stock markets of the world are at the lowest level. It adversely affected GDP of almost all the countries of the world. Many lost jobs and many are going to lose jobs in the future.
Thank you very much to you Iqbal Thonse Hawaldar for your valuable answer.
Many economic data show that the impact of the SARS-CoV-2 coronavirus pandemic causing Covid-19 disease on the global economy is very large. The high probability of potential recession of the global economy and in many countries in 2020 is currently estimated. Well, in 2020 it is no longer trade wars that will be the main factor in the decline in international trade, international capital flows and other factors of production, international economic cooperation. In 2020, the main factor behind the decline in international trade, international capital flows and other production factors, international economic cooperation, etc. is the development of the SARS-CoV-2 Coronavirus pandemic. In connection with the above, an interesting topic of research in the field of economics and finance may be the impact of the SARS-CoV-2 coronavirus pandemic causing Covid-19 disease on business processes, the functioning of markets, including financial markets and entire economies. In addition, important research issues include the analysis of the increase in the importance and scale of digitization of the economy, restructuring processes of enterprises in crisis, the increase in the importance of electronic payments made via the Internet, processes of changing the share of individual sectors and branches of the economy in GDP, the increase in the risk of a crisis in state finances, shaping and improvement of interventionist instruments, anti-crisis socio-economic policy, including the monetary policy of the central bank and national fiscal and budgetary policies, etc. A high probability of recession in many countries in 2020 is forecasted. The duration of a recession in individual countries can vary widely, from several weeks to several months. The economic downturn is also illustrated by the negative sentiment of stock market investors who operate on capital markets, commodity exchanges, stock exchanges, etc. The strongest sell-offs, declines in asset prices on these exchanges occurred when information about a developing pandemic spread around the world just before the moment of announcing by banks central information to the media that they plan to lower interest rates which they quickly did. Then governments of several countries announced their intention and after a few days began to introduce interventionist instruments under anti-crisis socio-economic policy, including fiscal policy (tax breaks for enterprises, deferred payment of taxes and contributions to the social security system, subsidies from public remuneration employees to limit the scale of employment reduction in companies, etc.) and anti-pandemic and sanitary safety instruments (home quarantine, wearing protective masks, restrictions on the movement of citizens in public places, temporary closing of restaurants, hotels, schools, kindergartens, universities, museums, cinemas, galleries, libraries, shopping centers, swimming pools, sports centers, service facilities, some types of shops, and in some countries a temporary ban on admission to city parks and forests has also been introduced). At that time (February - March 2020) asset valuations on capital markets exchanges fell to low levels, close to the levels of valuations from the period of the global financial crisis 2008. However, currently (May - June 2020) positive information is appearing from many countries suggesting that the scale of the Coronavirus pandemic SARS-CoV-2 may already start to decrease or the pandemic is clearly falling into decline. Every day there is more and more positive data from various countries suggesting that the pandemic is decreasing, which means that the anti-pandemic security measures and instruments used could significantly help in reducing the scale and slowing down the development of the pandemic. All these processes should already be included in the valuation of commodities and securities on capital market exchanges. In this regard, do current valuations of securities present the state of the economy as it is now or what will be in a few months? The impact of the current SARS-CoV-2 Coronavirus pandemic in individual countries is also usually large on the banking sectors. This is mainly an indirect impact on commercial banking. Mainly the cyclical, secondary impact that comes from the decline in economic activity in other sectors and branches of the economy. On the other hand, the impact of central banking that stabilizes economic processes in the banking sector and indirectly in the entire economy depends on the issue of the real scale of independence of the central bank from other public and governmental institutions and whether the national or international currency operates in a given country. If the country has international currency, then the scope of application of specific monetary policy instruments used as anti-crisis policy tools is much smaller compared to the situation when the country has the national currency and the central bank has all the tools of a full monetary policy. In addition, the impact of a pandemic on financial markets is also large. In such special, unusual situations that currently occur (the time of the SARS-CoV-2 Coronavirus pandemic causing Covid-19 disease) on financial markets, most investors are more often driven by emotions, technical analysis, short-term media information, etc. and for a moment forget about the key role of fundamental analysis. An interesting issue is also the fact that the growing importance of behavioral responses on financial markets does not only apply to individual investors but also to other types of entities active on these markets. On the other hand, the largest market players, large banks and investment funds make decisions also in conditions of increased uncertainty, limited possibility of precise valuation of investment risk, etc. Until now, stock exchanges were considered to be a barometer of the economic and financial condition, forecast economic growth, development of enterprises, individual markets and the whole economy. It is to be hoped that the current crises will not change these principles and rules prevailing in previous years. However, there is always such a risk in a situation when a new risk category suddenly appears, which in a previously difficult to forecast way strongly affects financial markets causing an increase in the volatility of valuations of financial instruments, nervous behavior of market participants and through these psychological translations also quickly affects functioning of the whole economy. So linking these issues, i.e. the economic situation on financial markets, including securities markets, to the development of the SARS-CoV-2 Coronavirus pandemic, the key issue is when there is information confirmed by hard data that the pandemic in individual countries and on a global scale begins to expire. There is currently little information on this subject, but this can change significantly with each passing day. In addition, the important issue is how this type of information is presented in individual media, whether anti-crisis interventionist government financial assistance programs for enterprises and citizens are implemented, the purpose of which is to significantly reduce the scale of potential development of the economic crisis, financial, etc. and the occurrence of a possible recession economy of a given country, also taking into account economic forecasts for the global economy. Currently, there is already a strong correlation between these anti-crisis measures mentioned in the previous sentence, their implementation in economic processes or announcements about their introduction, and changes in trends and investors' reactions on the securities markets. particularly important issues of the anti-crisis programs mentioned above, which are particularly highlighted in financial markets, including capital markets, are the decisions taken by central bank governors on interest rate cuts, launching programs to increase liquidity in the banking sector and decisions of prime ministers, finance ministers, etc. who run support programs, help for enterprises, including the introduction of additional temporary tax breaks and exemptions, subsidies to employees' salaries to maintain jobs and survive the difficult period of the SARS-CoV-2 Coronavirus pandemic. In this way, in the next few months, the scale of the slowdown in the growth of the national economy, decline in production, investment, income and increase in unemployment may be significantly limited. However, these are ad hoc measures known from the experience of anti-crisis programs from the global financial crisis of 2008 and other pre-existing economic crises. A particularly important role for long-term economic development in the following months, but also years, is primarily played by investments and restructuring processes undertaken by the public sector in a situation where the private sector is in crisis. Only then can there be a return to a sustained, long-term increase in the valuation of financial instruments on securities markets and thus to a lasting improvement in the economic situation, but also to the stabilization and increase in the importance of fundamental analysis on financial markets. Therefore, it is currently estimated that there is a high probability of potential opportunities for a significant slowdown in global economic growth and in many countries in 2020. This slowdown, the economic downturn and in some countries also the recession may last for a relatively short period of time if the pandemic is actually entering (June 2020) the stabilization or decline phase in most countries. However, the period of significant recession characterized by a decrease in production, offered services (e.g. tourist, gastronomy, hospitality, etc.), consumption, investment in many branches and sectors of the economy, and an increase in unemployment, a decrease in income, tax revenues to the state's financial system may last for a longer period . Whether this period will be only a few months in the most optimistic scenarios or rather a few years in specific countries is determined not only by the scale of development of the SARS-CoV-2 Coronavirus pandemic, but also by many other secondary factors. These factors primarily include a different sectoral structure of the economies of individual countries. For example, in countries where tourism, hospitality, catering and other services related to tourism constitute a significant part of the national economy and generate a relatively large share of GDP, the crisis that is now beginning may be much deeper and longer lasting. how long the economic crisis will last is also determined mainly by several other factors, such as the significantly different state of state finances, public debt, budget deficit in the central budget of the state and local government units as well as in other aspects of the state public finance system. In addition, significant differentiation of the anti-crisis anti-pandemic and sanitary security standards currently used is also important. These standards are similar in many issues, but in specific issues there are significant differences, e.g. in the instruments used to limit the pandemic development rate, e.g. types of stores, services, production processes, etc., whose functioning has been temporarily disabled or replaced with remote customer service via the Internet in those economic and logistical processes where this is possible. In addition, it is also particularly important to diversify the financial scale and types of interventionist instruments used, anti-crisis socio-economic policy, including fiscal policy coordinated by the Ministry of Finance and monetary policy of central banking. All of the above-mentioned factors will significantly determine in the coming months the issue of time differentiation of the duration of the economic crisis in individual countries in the future, so whether this crisis will last only a few months or a few years. In view of the above, many current economic data already confirm the thesis that it is likely that an economic crisis is now beginning in many countries, which may after several months turn into a sovereign debt crisis in some countries. If this situation occurs in many countries, then in 2020 the global economy will most likely slow down its growth by several percent. compared to the previous year. On the other hand, however, in the following years there will be a high level of diversity in the economic downturn or recovery from the crisis that is currently beginning. My theses and statements above result from the analysis of sources of previous economic crises, including the global financial crisis of 2008, and the analysis and effects of interventionist, anti-crisis socio-economic, fiscal and monetary policy programs. I included the results of the analyzes in my publications available on my Research Gate profile.
Best Regards,
Dariusz Prokopowicz
It is negative impact at present situation. It becomes global problem. GDP is falling down.
Dariusz Prokopowicz A lot of thanks to you for your detailed explanation.
Rabin Thapa Thank you very much. Can you detail it with some relevant factors.
Dear Md. Shakhaowat Hossin,
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.
According to restrictions and the lower level of consumption and production; the fiscal incomes (VAT, excise duty, income tax, tourist tax) declined. Therefore the projected deficit could be higher.
Well, according to IMF, while the current World Economic Projects is at -3.0 in 202, it will probably bounce back at about 5.8 in Feb 2021 (much higher than 2019) - provided that some uncertainties are addressed (including a vaccine).
I think that we may analyze how credit expansion affected small and medium-sized enterprises.
Hi Shakhaowat
This article may be useful... https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=19658
Regards
Arun
Article Economic impact of government interventions during the COVID...
Article Financial markets under the global pandemic of COVID-19
https://lki.lk/blog/the-impact-of-covid-19-on-financial-markets-and-a-closer-look-at-srilanka/#:~:text=Sri%20Lanka%27s%20Market,scope%20to%20combat%20the%20pandemic.&text=Similar%20to%20other%20emerging%20economies,financial%20market%20and%20capital%20outflows.
Dear Md. Shakhaowat Hossin, I would like to add a few words to my comment above. In recent days (October 2020), the number of new SARS-CoV-2 (Covid-19) coronavirus infections in many countries is growing rapidly. Therefore, the current increase in the scale of the pandemic development may cause a significant decline in economic growth during the fall and winter season. A lot of data indicates that the current, second wave of the SARS-CoV-2 coronavirus pandemic will worsen and over the next few weeks / months the number of Coronavirus infections and Covid-19 cases will increase significantly. Probably the pace of economic growth will decrease dramatically in the coming months. Another economic downturn in various markets is possible. The downturn will be deepened if the lockdown of the economy is introduced again in individual national economies. However, on the other hand, a repetition of the March 2020 scenario on this issue, when the 1st wave of the pandemic was developing rapidly, will occur rather in a milder form of economic downturn. A milder form of economic downturn during the second wave of the pandemic will be determined by the following factors:
1. A smaller scope of the applied lockdown of the economy, as most countries have already exhausted financial reserves within the state's public finance system to introduce another, full lockdown of the economy.
2. The so-called Anti-crisis shields, i.e. interventionist socio-economic policies, financial support programs for commercial enterprises from the public finance system of the state already during the 1st wave of the pandemic and still applied during the 2nd wave of the pandemic.
3. Improved systems of integrated anti-pandemic risk management in public institutions, i.e. crisis management institutions, health ministries, etc.
4. Healthcare prepared for the development of the 2nd wave of the SARS-CoV-2 (Covid-19) pandemic to a much greater extent than at the beginning of the 1st wave of the pandemic.
5. The current development of the 2nd wave of the SARS-CoV-2 (Covid-19) coronavirus pandemic is caused by a new, mutant version of the G614 Coronavirus, which is characterized by a several times higher level of contagiousness but without an increased level of pathogenicity.
6. A significant part of the society has already been infected with Coronavirus, including the majority of infected people (about 80% of those infected) having been infected asymptomatically or very mildly having passed the Covid-19 disease and thus obtained the body's natural immunity to this virus.
7.Many companies that at the beginning of the first wave of the pandemic (March - April 2020) did not conduct business via the Internet are already a significant part of their business, accepting orders, servicing customers, selling products or services via the Internet and are not afraid of serious problems in connection with the development of the 2nd wave of the pandemic.
Best regards,
Dariusz Prokopowicz
One of the impacts is: Bank loan interest rate is getting lower to roll the liquidity diversely.
Dear Md. Shakhaowat Hossin
I think it is appropriate to consider factors such as interest rates, inflation, government expenditure on health care, the budget deficit and public debt.
Yours sincerely Iryna Kondrat
The impact of the SARS-CoV-2 (Covid-19) coronavirus pandemic on financial markets remains large. At the beginning of the first wave of the pandemic in March 2020, the scale of declines in share valuations on the stock exchanges was one of the strongest and most rapid in the context of the last few decades. On the other hand, the advent of highly effective Coronavirus vaccines in November 2020 also generated a major impact on financial markets, including capital markets, commodity markets, stock markets, currency markets, derivative markets, etc. The SARS-CoV-2 coronavirus pandemic (Covid- 19) indirectly also caused a large impact on money markets, as central banks cut interest rates to reduce the scale of the economic crisis, which began to develop rapidly in many countries from March 2020. Financial markets reacted much faster compared to changes in the economic situation in individual sectors and branches of the economy. Financial markets react quickly to such unusual events, such as the development of a pandemic due to informational and economic globalization, the psychology of financial markets and the specificity of the operation of exchanges on which particular categories of capital are traded, etc.
Regards,
Dariusz Prokopowicz
Currently (end of May 2021), vaccination programs for the SARS-CoV-2 (Covid-19) coronavirus are being carried out more and more effectively. In many countries, collective social immunity to this virus will be achieved by the middle of this year 2021 or by autumn this year at the latest. Therefore, in many countries for several weeks there has been a gradual decrease in the number of new coronavirus infections, a decrease in the number of people suffering from the Covid-19 disease and a decrease in deaths caused by this disease. In addition, the analysis of the impact of the Coronavirus pandemic on financial markets and the economy shows the weakening impact of each subsequent wave of the pandemic on economic processes, on the functioning of enterprises, the functioning of people and on financial markets, including capital markets, stock markets.
Greetings,
Dariusz Prokopowicz