Socio-economic impacts of the novel coronavirus

HOW TO CITE THIS ARTICLE: Evans O. (2020). Socio-economic impacts of novel coronavirus: The policy solutions, BizEcons Quarterly, 7, 3–12.

Health is fundamental to a prosperous productive society, whereas panic and illness can stifle production, consumption, recreation, travel, and overall well-being (Marin, 2017; Adeola & Evans, 2018; Lawanson & Evans, 2019; Nwaogwugwu & Evans, 2019; Fourie, 2020). Health disasters such as the Ebola virus in West Africa, the Middle East Respiratory Syndrome (MERS) outbreak in the Republic of Korea, and the rise of COVID-19 not only have global health impacts but also wide-ranging socioeconomic disruptions. For example, during the Ebola virus in West Africa from 2013 to 2014, “government revenues declined across the board, including direct taxes on companies, VAT receipts, and indirect taxes; Additionally, decline in private and foreign investors’ confidence led to financing gaps of more than US $600 million over the two years. These impacts cut across many sectors and undoubtedly have long-term consequences” in Guinea, Liberia and Sierra Leone (Smith et al, 2019). In addition, after killing at least 800 people and infecting more than 8000, the total global economic loss due to SARS was estimated to $40 billion. Much of this impact was due to consumer fears given the ease of transmissibility of the virus in public settings. Also, the wider economic impact of the 1998 Nipah outbreak in Malaysia was estimated at US $582 million (Dimmock, Easton & Leppard, 2016).  

In the same fashion, the incidence of the COVID-19 is growing at a disturbing rate with significant impacts on global economies and public health. According to Bloomberg, China’s first‐quarter GDP growth may drop to 4.5%; the global GDP is also expected to decline by roughly 0.42% in the first quarter of 2020. Economists have estimated that, without urgent global actions to curtail the virus in time, China is expected to lose up to $62 billion in the first quarter of 2020, while the world will lose over $280 billion. Ayittey et al (2020) compared these values to the World Banks estimate that even a weaker flu pandemic, such as the 2009 H1N1 viruses, would still wipe 0.5% off global GDP, which is approximately $300 billion.

During the 2003 SARS outbreak, tourist arrivals in Hong Kong dropped 68% just two months. In South Korea, where an introduction of MERS caused a brief 2015 outbreak, the number of international visitors dropped by 41% in mid-summer. The public’s contagion fear and governmental overreaction closed down many public events and stifled daily activities (Lee & Ki, 2015). The H1N1 influenza resulted in a US $2.8 billion hit to Mexico’s tourism industry, with a loss of one million tourists over a five-month period due to contagion fears. In a similar fashion, in a report on the COVID-19 outbreak, the United Nations World Tourism Organization [UNWTO] (2020) has emphasized a decline in international arrivals and receipts in 2020, revising its 2020 prospects for international tourist arrivals to a negative growth of 1% to 3%, meaning an estimated loss of US$ 30 to 50 billion in international tourism receipts. In fact, the impacts are estimated to be felt across the whole tourism value chain. For example, according to Global News (2020), bookings are down from China to Canada by about 70 per cent between October 2019 and March 2020 as many airlines have restricted the number of flights to the country, and several Canadian tourism marketing agencies have pulled out all their ad money from China.

Morbidity and mortality values may indicate severity of COVID-19 impact, but may not allow appreciation of the full consequence of impaired productivity from illness for a person, their household or their community. Impacts may involve psychological, educational, or professional losses on the individual and household. The high death toll during the West Africa Ebola outbreak trigger expanded social and household economic impacts, stifled growth rates, and lost wages due to inability to work or contagion fear, increased poverty and food insecurity, lost education and lost jobs.

In a similar fashion, if the age group of 15–44 years, those engaged in the labor force and parents of young children, account for majority of COVID-19 infections, the impact on economic activity, poverty and food security could be substantial. Incomes could drop significantly during the outbreak; consumption by households could decrease and the prevalence of undernutrition rise. Closure of schools, resulting in  weeks of lost education, could expose children to several types of child abuse (including sexual exploitation and violence against girls) with long-term effects such as emotional trauma and unwanted pregnancies. Economic implications of the COVID-19 can be detrimental not only to public health systems but to trade and travel, food and agriculture industries, various market types and retail chains, among others. These sectors are not traditionally linked to disease impact assessments, yet they are confronted with the threat of the virus wherein consumers are too fearful to access their services because of supply chain or their workforce is compromised.

There are many ramifications of the direct and indirect economic effects of the COVID-19: preparedness and prevention (practices that mitigate risk), the event itself (e.g., business continuity, supply chain disruption, public contagion avoidance behavior, trade and travel bans), and the event aftermath (e.g., permanently closed markets, long-term employment loss, impacts of lost education or being orphaned, etc.). There are increasing numbers of confirmed deaths. These numbers are expected to surge when indirect costs due to lost productivity and comorbidities are taken into consideration. The escalating pandemic has the potential to overwhelm healthcare systems and threatens to reverse the gains of economic development in many emerging markets. Considering the grave human, societal, and economic consequences, there is a critical need for health professionals and policy makers to recognize the magnitude of the COVID-19 epidemic and the potential devastation it may inflict, particularly in the developing world.

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