Name:QIGONG QIAO Student number:40303330 Title: The impact of the COVID-19 epidemic on the world economy

The impact of the COVID-19 epidemic on the world economy

 The impact of the epidemic on the macro economy is mainly reflected in two aspects: first, the spread of panic leads to the loss of investor confidence, which leads to the turmoil of the financial and capital markets; Second, the quarantine measures to control the epidemic press the "pause" button on the economy, thus putting pressure on both the consumer and production sides. We will analyze the impact of the epidemic from the perspectives of capital market and trade.

The capital market

On March 9th, as American stocks plunged at the start of trading, the S&P 500 index triggered the first circuit breaker, the second since the first in October 1997 during the Asian financial crisis. But this was just the beginning of a big bout of turmoil in financial markets. Three circuit breakers followed within two weeks of each other on March 12, 16 and 18, triggering turmoil in capital markets around the world. It is worth mentioning the circuit breaker event on March 12, when all three major stock indexes fell below 7% within six minutes of the opening of the U.S. stock market, triggering the circuit breaker mechanism and suspending trading for 15 minutes. According to incomplete statistics, on the same day, the stock markets of 10 other countries, including Thailand, the Philippines and Korea, Pakistan, Indonesia, Brazil, Canada, Mexico, Colombia and Sri Lanka, were suspended. Among them, Brazil's IBOVESPA stock index fell 15 per cent, triggering a third circuit breaker that week and the second on that day. Canada's main stock index fell 9.2 per cent, triggering a first-stage market-wide shutdown that halted trading on the Toronto stock Exchange and extended losses to as much as 10.5 per cent when trading resumed.

 

Many European stock markets, which do not have circuit breakers, also suffered heavy losses. On March 12th the European Central Bank surprised markets by leaving its three main interest rates unchanged. Europe's stoxx 600 index, seen as an indicator of market panic, extended its losses to 10 percent, its biggest one-day drop on record, while Germany's DAX and France's CAC40 fell more than 10 percent and Britain's ftse 100 fell nearly 10 percent. Bitcoin fell below 5,000 yuan on the day, down 37 percent in 24 hours.

 Trade

Since 2000, international trade has made great progress. According to WTO data, the total global trade volume increased from 6.7 trillion US dollars in 2000 to 19.7 trillion US dollars in 2018, indicating a high degree of trade globalization. However, in recent years, due to the economic and trade frictions between major economies and the increase of international trade barriers, the growth of global trade is stagnating. According to the CPB Global Trade in Goods Monitoring Index, the volume of global trade over the past year fell by 0.45 per cent from 2018, the first decline since the 2008 global financial crisis. With the outbreak of COVID-19 around the world, countries have taken measures such as transportation control and population movement restriction, which will make the global economic and trade environment more severe and bring further impact to world trade.