As the entire world struggles to find a way to fight the global pandemic, the financial market keeps wondering what will be the actual effect of COVID 19! How long will it take for the economy to recover from this much unexpected turn of events? The answer is- not soon enough.
What allegedly started as a small virus outbreak in Wuhan, China, quickly spread across the world and approximately claimed 321k lives as of now. Most countries went into lockdown latest by April ’20 and it is still continuing. Due to lack of cure and uncertain characteristics of the virus, we are not yet sure how long this will continue or this will become the new normal.
The Global Uncertainty
Rishi Sunak, Chancellor of the Exchequer, said that the growth curve of the UK economy might not be a sharp ‘V’. The global economy is expected to see the coronavirus recession, which is an after effect of this extensive lockdown and UK will not be an exception. All major economies have started experiencing the heat. While the economy of Japan fell in to recession in the first quarter of the year, experts claim that the US economy will not gain its full glory until after 2021. Even the Chinese economy is no exception.
Steps taken to Support the businesses by the Government
To get the country’s economy through the challenging times during the pandemic, the Chancellor unveiled a package of £30 billion in his 2020 budget plans in March. This move was expected to boost the economy and the get the country through this COVID 19 outbreak. He said of this £30 billion, £12 billion will be used specifically for COVID 19 outbreak.
Additionally in April, the government announced the creation of the new Coronavirus Large Business Interruption Loan Scheme (CLBILS). According to the plan the government will provide 80% guarantee to enable the banks to give loans up to £200 million, raised from its earlier lending cap of £50, to firms to keep them afloat. However, the firms opting for such loans have been banned from pay cash bonuses to executives or dividends to shareholders until the loan is repaid. In the meantime, Bank of England has also announced an emergency rate cut. More measures might be taken with time as seen fit.
The Path to recovery
All the above measures may provide a momentary relief to the struggles of the country during this critical time, but it will not be enough to escape the long term effects. The International Monetary Fund recently announced that the world is facing the worst ever economic crisis the Great Depression. As compared to its earlier prediction that the world economic growth will outpace 2019 by 3.3%, IMF recently stated that it will contract by 3% this year as a result of the pandemic. This drop will be way more severe than the recession of 2008-09.
It is expected that with time and patience we will recover from the massive loss, but it will require a lot of effective planning from all the counties both developed and emerging to see a new dawn.