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Understanding The Economic Shock of Coronavirus

The document discusses how social distancing measures to curb the spread of COVID-19 have negatively impacted the economy by disrupting supply chains and business operations, potentially leading to a global recession. It examines questions around whether economies and industries will be able to recover from the pandemic shock and return to pre-crisis levels. The authors analyze scenarios to understand the scale of the economic impact and actions policymakers could take to mitigate harm.

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Fairey Porciuncula
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27 views

Understanding The Economic Shock of Coronavirus

The document discusses how social distancing measures to curb the spread of COVID-19 have negatively impacted the economy by disrupting supply chains and business operations, potentially leading to a global recession. It examines questions around whether economies and industries will be able to recover from the pandemic shock and return to pre-crisis levels. The authors analyze scenarios to understand the scale of the economic impact and actions policymakers could take to mitigate harm.

Uploaded by

Fairey Porciuncula
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NAME SUBJECT

SECTION PROF E. VIRAY

“Understanding the Economic Shock of Coronavirus”

By: Philipp Carlsson-Szlezak, Martin Reeves, and Paul Swartz

Source: Harvard Business Review

Summary:

Along with the imposition of social distancing comes an economic downturn. Yes,
social distancing and other preventive measures can help reduce disease spread.
However, it is stated that this measure is only supposed to be temporary. These
precautionary measures have had a negative impact on the economy; they have
disrupted the flow of goods and people, stalled economies, and are on the verge of
delivering a global recession. Predicting what will happen to one's economy is
undoubtedly complicated, as the crisis's different aspects are unprecedented and
unknown. In line with this, the question of whether the economy will be able to recover
from the COVID19 pandemic shock arises; will various industries or businesses be able
to recover and return to pre-shock output levels and growth rates? Besides that, the
authors were able to run several scenarios to simulate the size and scale of the
economic shock as well as the path forward. They must take into account what is
happening to the economy during the shock and what possible measures and actions
policymakers should take to prevent the economy from being harmed.

Critique/Reaction:

The article clearly shed light on what starts to happen in the economy during the
COVID 19 outbreak. It has explained what the various preventive measures, such as
social distancing, resulted in; its effectiveness in physically preventing the disease, and
the economic consequences. Given that no one expects the COVID 19 to last as long
as it is, the longer it takes, the more difficult it is to predict what will happen to the
economy. It is difficult to anticipate when it will recover and whether it will be able to
return to pre-pandemic levels. This paper would go over the article's content in greater
detail, as well as my reaction and critique to it. Is the economy truly on the brink of
collapse? What are the things we should think about? What policies are required to
mitigate the damage? These are just a few of the questions we can draw from the
article, and they may be addressed further in this review.

According to the article, the economic contagion is now spreading as quickly as


the disease itself. And I, for one, agree with that statement. Businesses are gradually
collapsing as the COVID 19 begins. Policymakers' imposition of preventive measures
such as lockdowns and physical separation has worsened this. As a result of this, many
businesses have ceased operations and even gone bankrupt, as they are earning less
or having difficulty maintaining their business functions. As an example, as of the
beginning of April 2021, the Philippines was once again forced to submit to enhanced
community quarantine (ECQ) due to the continued rise in COVID19 cases. During this
time, the government has put business restrictions in place, specifically allowing only
businesses involved in the value chain of essential commodities to operate. Grocery
stores, food take-out, water stations, and so on are examples of this. We can see here
that only a small portion of the business industry is working, while the rest is left on their
own or waiting for the go signal to operate again With this, we can clearly see that
businesses are not operating normally as they were before the pandemic started. Right
now, business owners must consider how they will sustain their operations without
earning as much as they always do, as well as how they will conduct their operations in
accordance with the government's restrictions. Furthermore, I have realized that the
policies implemented during the pandemic are primarily focused on mitigating the
spread of the disease or, in general, on health; however, only a few have focused on
the long-term effects, such as the effect on the economy, when businesses begin to fail.
Now that we are aware of the different consequences the COVID19 has brought
mainly on health and even to the economy. The question of whether or not the failing
economy and failing businesses can recover arises. As previously stated, policymakers
lack a clear course of action in response to failing businesses. As a result, the reactions
of firms and households became uncertain. The various industries must respond on
their own or else they will be seriously negatively impacted. To exemplify, when ECQ
was imposed in the Philippines, movement was greatly constrained, resulting in the
closure of some businesses and the loss of jobs. Others, on the other hand, see a bit of
hope in the continuation of their businesses, but certain measures must be put in place
to keep the company afloat. In order to survive, many businesses have laid off a large
number of employees in order to respond to the current financial crisis. According to a
recent DOLE report, 1,421 establishments laid off 25,226 workers as a result of
permanent closure or reduced workforce due to the economic downturn. In addition,
142 businesses permanently closed their doors, displacing 2,346 workers, while 1,279
retrenched a portion of their workforce.

Overall, it was able to inform us that, as of now, the economy is barely surviving
due to COVID 19 and the restrictions imposed. It is difficult to predict when it will
recover, but with recognition of the problem, the government is doing everything
possible to assist small businesses up to large corporations in surviving the business
conflict situations they are involved in. The main solution in this crisis would be for
people to be able to act as one. With this, we can face whatever comes our way,
whether it's the COVID disease or the global crisis we're in.

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