Impact of lockdown on Economy
International Monetary Fund (IMF) has said that due to the lockdown because of corona virus the economy worldwide has already hit by recession. Infact, according to them, not only will this recession be worse than the 2008 Global Financial Crisis but it will be the worst economic recession in the past 100 years after the Great Depression of 1930’s.
Economic slowdown happens when the GDP growth rate is low it is not negative it stays in positive, but it is lesser in comparison to the previous years. For example, we have been seeing economic slowdown in India in the past few years due to the bad policies of the government. But economic slowdown does not mean recession.
Most of the economist describes recession as when the GDP frown rate of a country goes into the negatives for two quarters or more.
Depression is basically recession over a long period of time. It is defined as a -10 or even lower GDP growth rate of a country for a period of 3 years or more. Depression is such a terrible condition that over the past 150 years, the world economy has faced depression only once The Great Depression of 1929.
The Great Depression went on for more than 10 years the GDP growth rate of the world economy had almost touched minus 15%. The unemployment rate in most of the countries was 25-30%. Those were appalling conditions. Such a bad economy state worldwide has never happened since then. The global financial crisis of 2008 saw the worldwide GDP fall by an only 1%. So you can compare -15% and -1%. The global financial crisis 2008 is referred to as the great Recession. Most of the economist opinion is that the condition of todays is going to be worse than the recession of 2008. Consider the example of France, the quarterly GDP growth rate of the first three months in France has been calculated to be -6%. This is the worst performance in the history of France ever since world war –II. It is being predicted that the GDP growth rate in the second quarter in Germany is going to be -10% compared to 2008, there are some critical differences in today’s scenario, the first being that the people today are not working due to the lockdowns. When recession had struck in 2008, some bank did collapse and some people did lose their jobs. But on the whole, the economy was still running and the people were still working, which is not possible today. A lot of companies did try and inculcate work from home, but think about it there are so many industries and sectors where work from home is not possible.
For example, Sports Industries all the sporting events and matches have either cancelled or postponed. The Olympics got cancelled. It was going to be held in Japan in 2020. Now, it has been postponed until 2021
Hotels, airlines, travel agents, tour group organizer, air hostesses, pilots, the people are working at the airports. All of these people are unable to work and earn salaries right now.
Film and entertainment Industries Cinema Halls have been shutdown. The people working at the cinema halls. The screening of films has been halted. The film production has been stalled. Thousands of people are employed to make a film. They have no livelihood right now. Concerts have been shutdown. Artists have become unemployed because of this.
Restaurant industries are also one of the worst hit industries. People have curtailed going to restaurants and so the restaurant owners are unable to garner profit. So all the people employed in restaurants are becoming jobless. This is exactly what is happening across the world.
Technology Industry is an industry that has remained neutral to some extent. There have some negative effects in the field of manufacturing where plants and factories were forced to shut down. But due to “work from home” a lot of people are able to work and there are some apps like Zoom video app, Skype and Google hangouts. There has been a tremendous growth in these apps because of now people are communicating through these. Netflix, Amazon Prime and online gaming are among the select few sectors that have profited.
By- Minhaj Nezami