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The re-emergence of the virus “cuts” the hopes of economic recovery

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The continued emergence of new outbreaks or the sudden reappearance of the virus interrupts economic activity to such an extent that it significantly slows down the path to a strong recovery

Any hope that the coronavirus that plunged the United States, Europe and much of Asia into a historic economic downturn would “breakthrough” collapsed this week.

The virus continues to spread to parts of the United States, developing countries, especially India, Brazil and South Africa and has returned to Japan, as well as parts of Europe and China.

At the current rate of around 250,000 new cases per day, by the end of 2020, the cases could exceed 50 million worldwide. Regarding pandemic deaths, Eric Topol, director of the Scripps Research Translational Institute, estimated last month that “we will exceed one million.” So far, according to Johns Hopkins University, more than 674,000 deaths have been recorded worldwide due to coronavirus, while according to the French Agency, the death toll has exceeded 680,000 worldwide.

The time to find and release a safe and effective vaccine will be very difficult, according to Michael Osterholm, director of the Center for Infectious Diseases Research and Policy at the University of Minnesota, said that “we will see a significant increase in transmission to adults and people with vulnerability” and things will get worse ‘as the flu season begins and indoor activities increase’.

At the same time, as governments tackle the re-emergence of the virus by imposing local lockdowns, the prospects for a rapid global economic recovery over the year have diminished, according to economists and business executives.

Although the situation is better than in April and May, when the almost universal lockdowns to stop the spread of the virus dealt a severe blow to the economy, the continued emergence of new outbreaks or the sudden re-emergence of the virus, halts economic activity to such an extent to significantly slow down the path to a strong recovery.

The vaccine

Data from various sectors from restaurant bookings to jobs show steady or upward trends in several economies. However, many experts estimate that the highly contagious virus will remain an invisible enemy until the first generation of effective vaccines is released, something they themselves do not expect until 2021.

In the United States, Fed Chairman Jerome Powell said this week that “rising cases and a resumption of anti-virus measures are beginning to affect economic activity,” citing declining consumer spending and weakening labor market indicators in small enterprises.

On Thursday, the United States announced that its economy shrank at a rate of 32.9% from April to June, which is one of the worst performances in history.

Even more, worrying for some is the number of new applications for unemployment benefits which increased for the second consecutive week at a time when emergency benefits to some 30 million unemployed people expired at the end of July. Congress is divided over whether and to what extent unemployment benefits and direct payments to Americans should be extended.

Other countries that appear to be in control of the virus are facing new outbreaks. China has seen an increase in infections in the northwestern region of Xinjiang. The United Kingdom has reinstated restrictive measures in parts of the north of England just weeks after they were lifted.

European concerns

The resurgence of cases across Europe has led governments to impose new travel and social restrictions, such as the UK quarantine on all travellers from Spain. France, Belgium, Germany and other countries are also experiencing alarming increases.

Although unemployment benefits are generally more generous in Europe than in the US, the economic woes are expected to widen in the euro area. Unemployment in the region could reach nearly 10% by the end of the year as the economy declines, according to a Bloomberg survey. In the United Kingdom, unemployment is projected to reach 8%, more than double the previous year.

At the same time, Goldman Sachs Group Inc warned that Asia-Pacific economies, which accounted for more than 70% of global growth in 2019, hit a major turning point in June when the region’s resumption of the economy “slowed significantly” and significant challenges were emerging.

Third-quarter GDP growth will be strong compared to a very weak second-quarter, the smoothing shows it will be slower from now on,” said Andrew Tilton, Goldman’s chief economist for the region.

Business collapse

The blow to business remains strong, especially in the United States, where more than 160 companies have already filed for bankruptcy.

From retailers and airlines to restaurants and gyms, includes well-known names such as Hertz Global Holdings, JC Penney and Ascena Retail Group, owner of clothing chains Ann Taylor and Lane Bryant.

More than half of the S&P 500 companies that have announced results so far, recorded a decrease in profits by about 33% from the previous period, according to data compiled by Bloomberg. General Motors, General Electric, Starbucks Corp and Nike Inc. are among those who reported losses. And so on.

Large companies are showing signs of declining demand in the US following the new rise in cases that began in June. “While our hopes have been revived from the first signs of recovery, the last few weeks have shown that the course may be uneven,” said Boeing Co. CEO David Calhoun this week.

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