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Economic consequences of the coronavirus

There is no doubt that the COVID-19 coronavirus pandemic is shaking up all the countries of the world. Some nations’ health systems are collapsing and political leaders are worried about the rising number of infections and deaths that are increasing every day. But the disaster generated by the new coronavirus is not only in the hospitals and patients who suffer from it, but it also has economic consequences that cause consumption to fall and many activities to be difficult to recover in the future. 

The outbreak has generated economic impacts that are shaking the global commodity markets. The first cases occurred at the beginning of the pandemic, when the epicentre of the pandemic was China -today it is Europe-. Shipping, mining and gas companies began to stop production, slow down transport due to the quarantines to be faced and renegotiate contracts. There are importers who return deliveries, exporters who see enormous complications in continuing their activity and there are times of negotiations where what abounds most are speculations and hypotheses on how to continue with economic life.

Economic consequences of the coronavirus

The coronavirus outbreak in China has triggered economic woes that are hitting global commodity markets and interfering with the supply networks that are the basis of the entire global economy.

The prices of essential industrial raw materials that are essential globally such as copper, iron ore, aluminium and liquid natural gas have fallen sharply since the virus emerged. The value of the currencies of the countries that export these goods at high rates – Brazil, South Africa and Australia, among others, are among the lowest levels known in recent times. In contrast, commodity producers and mining companies are forced to reduce their production in order not to collapse inventories and create a major problem.

In summary, when the Chinese economy first fell, which, due to its characteristics of being fundamentally industrial, is also the one that consumes the most raw materials in the world, it generated a problem of very large dimensions in the countries that produce raw materials. In addition, today the virus has spread to other continents, where in addition to the effects it has had on international trade operations, it has also destroyed domestic economies, while there are countries -mainly in Latin America- where self-employed and autonomous workers abound.

The complete closure of cities and countries, with millions of people cut off, transport restrictions, drastic reduction in flights and an almost unprecedented drop in many activities have brought down the price of oil worldwide. Indicators such as this have triggered different assumptions about how commodity prices will continue in the near future, where food is likely to become in high demand.

On February 16th Kristalina Georgieva, managing director of the International Monetary Fund, contributed that estimates of world economic growth, estimated at 3.3% for this year, could be reduced by 0.1% to 0.2% by the coronavirus. But the development of the spread around the planet means that such estimates must be taken with great care, as they could vary according to how cases continue to occur.

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