Coronavirus The economic impact on the U.S
The Coronavirus (COVID-19), is a respiratory illness that can affect everyone and can spread from person to person. The first case of this disease has been identified in Wuhan, China. But, this virus has rapidly spread all over the world and now there are cases in almost all countries. Of course, the COVID-19 can affect each and everyone of us physically but it all has a huge effect on the economics of the whole world. Indeed, Kristalina Georgieva the director of the international monetary fund said that this virus is the world's most pressing uncertainty. This can prove that this decease is definitely a financial threat especially in the US.
The Impact of the COVID-19 on US stock market
In the past few day, the most important indices have lost almost 10% of there value. Since the virus has directly affected the world production this had a persecution on the US market. Indeed, the decease that started in China has created a massive panic all over the world. This resulted in many countries imposing quarantines like in China or in Italia. This situation forced the closing of many firms and lowered the global spending worldwide and all this of course affected the US economy and has a direct impact on the US stock market that felt of more than 7% on the 9th march 2020.
The economical effect of the virus on the US can be more important than China
Just like the coronavirus is more deadly for older people, his economical effects are more intense in mature economies rather than in country like China. The main reason of this is that high income countries tend to have a very developed service sector. In other terms, it's a sector of activity where people have be in contact with each other. But, with the fear of the virus, many people will instead stay at home. Now imagine the cost of all the loss of activity that can generate a whole country that stays home.
Let me give you some examples, only in the sporting industry, US population spends 10 times more than China and with a virus like the COVID-19 we can expect that all those tournaments will be cancelled. Or We can simply imagine the whole country not going to malls or not doing any other activity. This will definitely affect more a country like the US that has an economy that highly counts on those activity sectors.
What can happen if the virus persists and spread
If the virus can not be contained, the economical consequences will be much higher. Indeed, since China production has stopped because of the pandemic this will directly affect the US supply Chain. In other words, the production will heavily slow down so the China will not be able to export it products to other countries what will slow down the economy of other countries. This situation will lead the consumers and businesses to spend less because they have less money. Plus, if the virus continues to expand this will mean that many businesses will stop working in the US what can mean to a loss of job for millions of people.
So with all this information we can think that the Fed will lower it's interest rates to increase spending but the interest rates are already near zero what means that the Fed capacity of increasing the economy is very limited.
Finally, let's hope that the the pandemics stops expanding, because not only it affect people in general, but it has the power to significantly slow the economy. Indeed, that is exactly what happens in the past weeks and will become even worst with the expansion of the virus.