Stay-At-Home Impact on the Economy During the COVID-19 Pandemic Research Paper

The COVID-19 pandemic and related quarantine measures have severely affected the economic situation all over the globe. Multiple restrictions on international transportation and, in some states, inter-regional traffic, as well as the requirement to spend most of the time at home, have substantially affected the worldwide supply chain. According to Ma et al. (2020), the pandemic is fraught with, among other things, increased unemployment, a sharp decline in GDP, and financial market volatility. This paper examines the global financial consequences and the business impacts of quarantine measures taken in many countries.

Global Economic Consequences

It should be noted that the global economy is not encountering such a phenomenon for the first time. The research group examined the economic impact of historical epidemics and pandemics of the previous millennium (Jorda et al., 2020). The results revealed that there had been a significant decline in asset returns, a period of depressed investment opportunities over several decades, and a negative impact on wage levels. At the same time, the impact of the pandemic and quarantine activities on the economy is already evident. Researchers state that “direct supply disruptions will hinder production since the disease is focused on the world’s manufacturing heartland (East Asia) and spreading fast in the other industrial giants – the US and Germany” (Baldwin & di Mauro, 2020, p. 4). Disruptions in major production sites are already beginning to have a significant effect on both the private and public economic sectors.

It is particularly significant to emphasize that the economic implications of the pandemic will affect even countries with low morbidity and lack of quarantine measures. Due to the global situation, the economic activity of international companies has dropped dramatically, as well as the prices of many products and resources, including oil. These circumstances will adversely affect both commodity economies and producers of goods and services.

Business Impacts

It should be noted that despite the general adverse economic trend, some market participants benefited from the situation. According to Koren and Peto (2020), “businesses that rely heavily on face-to-face communication or close physical proximity when producing a product or providing a service are particularly vulnerable” (p. 13). At the same time, companies whose activities are related to social media and digital space, or allow remote work, either do not suffer from excessive adverse conditions or even experience increased demand. Some businesses whose operations are particularly crucial during quarantine, such as food delivery companies or scientific medical facilities, also increase profits.

However, all companies have higher expenditures on additional safety measures. Most of the companies whose operations are associated with a face-to-face presence have been severely affected. This is mainly relevant to transport organizations, restaurant and hotel business, retail, as well as art and entertainment industry, are particularly affected. Researchers argue that the pandemic will reduce the companies’ profitability, hurt employment, and may also increase debts (Ma et al., 2020). State financial support is particularly useful for small and medium-sized businesses, but not all governments are able to provide it.

These tendencies can be examined with the example of two major companies, Amazon and United Airlines. United Airlines, which usually has high demand in March, welcomed a million fewer passengers, and the number of customers and bookings, as well as revenue, are expected to decline. The products and services of Amazon, which is the leader of the e-commerce market, in turn, became even more popular. The company even faced problems with logistics and delivery due to the vast number of orders. This distinction is evident at this stage, but the deepening economic crisis can be devastating for both types of companies. If customer income declines dramatically, it will definitely affect all producers and service providers.

Conclusion

It is not yet possible to determine the full impact and extent of the economic downturn due to the COVID-19 pandemic and quarantine measures. However, specific tendencies related to employment, business profitability, falling prices for natural resources, and the general suspension of a wide range of economic activities are already evident. This situation will undoubtedly provide an opportunity to consider the economic interdependence of various states and international companies and the specifics of globalization processes from a new angle.

References

1. Baldwin, R., & di Mauro, B. W. (Eds.). (2020). Economics in the time of COVID-19. CEPR Press.
2. Jorda, O., Singh, S. R., & Taylor, A. M. (2020). Longer-run economic consequences of pandemics. Covid Economics: Vetted and Real-Time Papers, 1(3), 1-15.
3. Koren, M., & Peto, R. (2020). Business disruptions from social distancing. Covid Economics: Vetted and Real-Time Papers, 2(8), 13-31.
4. Ma, C., Rogers, J. H., & Zhou, S. (2020). Global economic and financial effects of 21^st-century pandemics and epidemics. Covid Economics: Vetted and Real-Time Papers, 5(16), 56-78.