A short-term phenomenon for three basic reasons


 A short-term phenomenon for three basic reasons

THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 OUTBREAK:

 The corona virus disease 2019 (COV-ID-19) has spread from Wuhan in Hubei Province, China to countries across the world. This is a clear testimony to the fact that we live in a highly interconnected world. This disconnectedness manifests itself in a number of ways ranging from politics, economy, to culture.

This globalization phenomenon, which in the recent past has deepened and broadened with unprecedented speed, has been propelled by a number of factors including improved technology in transportation and telecommunication, movement of people and capital, diffusion of know-edge, etc.

I would like at the outset commend and congratulate the Chinese leadership and its people for the efforts being under-taken so far to fight the virus. Indeed, we have seen over 41,000 healthcare workers in 330 plus medical teams converging in Hubei, the hardest hit province, from across the nation to support epidemic control. Further, we witnessed several thousand engineers and construction workers building the two specialized hospitals, equipped with 2,600 beds.

More-over, according to government sources, these measures are paying off since the number of daily confirmed cases, outside Hubei, have fallen from a peak of 890 on 3 February, to only 3 on 29 February, and the situation in Hubei and Wuhan has been brought under control. This shows clearly that the epidemic is controllable.

The above commitments and determination displayed by the Chinese Government notwithstanding, there are negative economic and social effects that will be experienced by countries which are dependent on China. With regard to which channel the impact of the virus will have obvious negative effects, the answer is very clear: on trade and people-to-people exchanges.

This means there will be decrease of both imports and exports. This will in turn translate into reduced personal incomes, decrease in government revenues, and increased inflation rates, triggered by scarcity of imported commodities.

The virus will impact negatively on people-to-people exchanges, especially on business people and tourists. Some airlines, such as Kenya Airways, have suspended its flights to and from China. Such measures have negative effects not only on the tourist sector but also on the airline industry. For example, Kenya Airways has already recorded a loss of over USD 8 million.

In spite of the bad side of the virus on countries’ economies, there is good news: these negative effects are short-term and would not have long–term social and economic effects for three basic reasons. First, China has the capacity to control the further spread of the virus.

Second, the economic fundamentals in China have not deteriorated. In other words, the fundamentals sustaining sound economic growth have not changed and will not change in the short run. Indeed, the country remains and will continue to remain a “heaven on earth” for investors worldwide.

That being the case, China’s economic recovery will be rather quick. Third, China’s policy of relocating some industries outside its borders is paying off, since it mitigates the negative effects of the epidemic.

Then what are the lessons to be learned from the COVID-19 outbreak? Firstly, it is the reminder that the interconnected global economy has its merits and demerits. Secondly, countries’ preparedness for highly infectious diseases, worldwide, is inadequate.

Thirdly, with a view to enhancing preparedness, online trade should be scaled up. Fourthly, China’s policy of relocation of industries needs to be complemented by de-concentration of industries and services. Lastly, the most effective weapon to win this “smokeless war” is through solidarity of nations and peoples. That being the case, negative attitudes of pointing fingers, discrimination and xenophobia should never be given a breathing space.

(The author is Professor in Economics, and Director of the Centre for Chinese Studies, University of Dar es Salaam)