The global economy never remained the same since the pandemic came and went. It was enjoying a significant increase due to the development of technologies for human use. It even rose above the global debt crisis and financial crisis in 2010 and 2008, respectively. Yet, the global economy’s improvement plummeted when COVID-19 came and it’s still struggling to recover the hit. Financial markets all around the world lost millions of dollars and every country underwent a significant change. Today, there are still finance podcasts talking about the COVID-19 situation.
Relationship between the financial crisis and COVID-19
The prominent increase in the COVID-19 market crisis was caused by the decline in the financial markets at that time. This highlighted how important the financial market is to the global economy. To efficiently increase financial integration, it’s imperative to know the pandemic’s influence on the economy. Then financial experts can use that to prevent and mitigate financial risks. Additionally, experts should examine the cross-country financial impact of COVID-19. And if there are any changes brought forth after the pandemic, they should identify them.
Areas affected by COVID-19
The stock market
The first sector to be affected is the stock market, as it plays a vital role in the financial markets. Since stock market investment is a high-risk venture, being impacted by COVID-19 means a huge loss of money.
Examples
- Japan: In 2020, Japan’s stock market prices plummeted.
- Brazil: In the same year, Brazil’s stock market fell drastically.
- China: The Shenzhen and Shanghai stock markets were hugely hit and declined at a 20 percent rate.
- India: India underwent a huge financial and economic crisis during COVID-19.
- The U.S.: In March 2020, the American stock market (U.S.) went down four times. Other countries in the world like Brazil experienced the same thing.
- Italy: In February 2020, Italy’s stock market reacted badly and was critically affected, just like two other countries.
- South Korea: South Korea is one of the countries that were hit most in early 2020.
- Iran: Iran is also a country whose economy didn’t fare better in February 2020.
Industries that were hit the most
Industries like the consumer industry, food service industry, travel and tourism, logistics, and many more felt the brunt of the situation. This was made worse when various health bodies and the government declared travel bans and stay-at-home policies. Well, they weren’t at fault, as they were trying their best to keep people safe and prevent the virus from spreading.
For example, the U.S. banned travelers from Europe and some other continents from entering the country at that time. This includes investors, businessmen, tourists, and so on. The result was a rapid decline in U.S. stocks and the economy. Countries sharing borders with the U.S. got hit too due to cross-border relations.
Why the global market was affected
The global market didn’t perform well during the pandemic due to many reasons. Some of them include the non-existent relationship between the stock markets during COVID-19. This poses a problem because stock markets need to interact with each other. It is a way of reducing sharing of information to reduce financial risks in the global markets. But COVID-19 prevented that due to the total lockdown to prevent the spread of the disease. As a result, the stock market underwent a financial crisis during the pandemic.
Impact of COVID-19 emergency situations
Emergencies during COVID-19 exacerbated the situation when the stock market didn’t have enough cash flow. Restaurants, firms, and organizations were out of work during that period because no customers came out to patronize them. This affected the economy as there was an imbalance between the demand and supply of goods and services. Thus, the global economy was vulnerable and had too much pressure to rise immediately after falling. This further increased the 2020 financial crisis.
What has been done to cushion the market
The government of every nation has tried to minimize the impact of COVID-19 on its citizens and the economy. Even financial institutions are not left out of the intervention programs. For instance, some banks in the UK, Canada, and the US tried to reduce the economic shock. What they did was use emergency rate cuts. It is the hope of many that other financial organizations will do the same.
Conclusion
Lastly, the COVID-19 crisis emphasizes the need for schools to introduce finance courses that will outline risk mitigation during a crisis. It also shows the importance of financial literacy and why everybody should know how to manage their finances. Moreover, it is not only the nation that will suffer during an economic crisis. The citizens and every individual living there will suffer. Hence, we should try to reduce the economic impact during a crisis by seeking financial knowledge.
