How Covid- 19 Has Brought Global Financial Inflation

It is estimated that each month of lockdown shrinks an economy with 2.5 percent
How Covid- 19 Has Brought Global Financial Inflation
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The COVID-19 pandemic has adversely affected the economies around the globe. Whether the western and highly developed nations including the USA and UK, or third world countries in the Asia Pacific region.

Countries are facing huge troubles in maintaining their economy since countries are having lockdowns from months. From stocks to jobs and emerging markets, every aspect of the economy has been affected. Inflation in the wealthiest countries has collapsed at the fastest pace since the financial crisis, as the coronavirus outbreak sinks the world into the deepest recession for almost a century.

It is estimated that each month of lockdown shrinks an economy with 2.5 percent. So if the lockdown is for 3 months, there is 7.5 percent of the decrease in the output which makes a great loss for the countries. The two-digit deficits will be a lot more difficult for countries to knob. The countries will be left with very difficult choices. The loss of human assets and a huge financial crisis. 

People are not working, not earning at the moment. Yet, consumption needs have increased. The demand for essential goods has increased a lot and due to less supply, the prices have increased rapidly. This has resulted in huge financial inflation making it very difficult for the middle class and poor families.

 

However, there is also a deflationary impact because the demand for non-essential and discretionary goods has decreased significantly.

According to the Organization of Economic Cooperation and Development (OECD), annual growth in the price of goods and services across the group of 37 advanced countries slowed significantly in March as Covid-19 brought business and social activity to a near standstill.

In reflection of evaporating demand from consumers and businesses as governments impose tough lockdown measures to limit the spread of the virus, inflation across the OECD area dropped to 1.7% in March from 2.3% in February. As stated by the OECD, annual inflation also fell sharply in Canada to 0.9% in March from 2.2% in February, while there were also steep declines in the US, France, Germany, and Italy.

Thus, the Coronavirus Pandemic has affected the economies worldwide and has posed great challenges to them to deal with. This space and time need to be dealt with a responsibility to limit the negative consequences in the long run.

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