Question

Given that about 70 percent of the U.S. Gross domestic Product consists of consumers (households) expenditures, What are potential economic consequences of coronovirus on the economy?

Answer 1

The economic effect is on the rise as the planet struggles with the coronavirus-with the OECD warning the virus presents the biggest risk to the global economy since the financial crisis of 2008.

UNCTAD, the United Nations trade agency, warned of a downturn in global growth to below 2% this year, potentially wiping off the size of the world economy by $1 trillion. Companies are struggling with lost sales and disrupted supply chains due to China's factory shutdowns. Weeks after China placed travel restrictions on millions of its people, Italy put quarantine measures on its entire population, with France and Spain introducing similar measures and several other European countries restricting movement and business

Because of the impact of the outbreak on economies around the world, the Chinese economy is likely to be further affected by declining global demand for its goods. The U.S. Federal Reserve cut its primary interest rate to near zero on March 15 to counter the economic fallout. But the move, coordinated with central banks in Japan, Australia, and New Zealand in a joint initiative not seen since the financial crisis of 2008, failed to strengthen the sentiment of global investors, with oil prices dropping below $30 a barrel on March 16, and a 9 percent drop in share values when Wall Street opened.

China is the largest oil-importer in the world. The International Energy Agency (IEA) forecast the first decrease in global oil demand in a decade, with coronavirus reaching manufacturing and travel. Numerous trade shows, cultural and sporting activities around the world were cancelled or postponed. Early on, economic damage from the outbreak affected the transport and tourism industries In addition to the effect on airlines, the United Nations International Civil Aviation Organization (ICAO) estimates that in the first quarter, Japan will lose $1.29 billion in tourism revenue due to the decrease in Chinese visitors, while Thailand will lose $1.15 billion.