The Effects of the Covid-19 Pandemic to Worldwide Economy

Research PaperEconomics
Jan 3, 2007

Since COVID-19 has emerged in Wuhan China in December 2019, the world has felt the effects of the pandemic not only in terms of health, but also in business and finance. The world’s economy has taken a huge blow since the mandated lockdowns in many countries around the world which was enforced in an attempt to prevent further spread of the virus. Schools, offices, and even international borders have been closed in many countries. This paper is about the market crash that happened in March 2020 as an effect of COVID-19 and the Great Lockdown that ensued.

The world leaders’ fear of COVID-19 spreading in their countries have forced them to make the decision to implement strict health protocols. This in turn have forced many businesses to put a stop to their operations. Since 2020, many businesses have been forced to close due to bankruptcy, temporarily stop operations, and many employees have been losing jobs. The impact of the pandemic on the business industry is indeed severe to the point that the world is in danger of experiencing a recession that is much worse than what was experienced since the World War II.

What happened to the economy during the COVID-19 pandemic?

As of writing, almost 110 million people are reported to have been infected with COVID-19 and there are over 2 million deaths caused by the virus. COVID-19 has spread to a total of 223 countries and quite alarmingly, that number is not decreasing. As nine pharmaceutical companies have already developed a vaccine, with seven of the vaccines ready for use, some countries are already making it a priority to have their citizens vaccinated. There is a total of 181 million doses of vaccines administered to 79 countries. This is so that the people’s health may be more protected than before and to give the global economy a chance to recover.

Causes of the 2020 Market Crash

COVID-19 has caused extreme widespread panic as the pandemic was one of the things that the world welcomed in 2020 as it rapidly spread around the globe. It has even affected the global stock market as the virus heavily affected the investor’s decisions. The investors felt powerless facing the virus and so many felt that they had to retract their investments. At one point, the number of sellers had exceeded the number of buyers in the stock market. For that, the 2020 Market Crash has been dubbed as the Coronavirus Crash.

The COVID-19 pandemic managed to affect the industries of tourism, oil, food, services, external financing, stock trading, manufacturing, and exports. As the global economy came to an astonishing halt due to being crippled by the COVID-19 pandemic, the unemployment rate soared and the stock market crashed. Emerging markets have also been affected as international investments have avoided them which caused a slowdown in developing countries. The value of currencies also decreased that the prices of imported goods rose.

But is the COVID-19 pandemic the only one responsible for the March 2020 Market Crash? Surely there are other factors that led to the Coronavirus Crash. Days before the market crash, the oil industry had already been facing a dilemma as an oil price war broke out (Pankratyeva, 2020). Saudi Arabia and Russia clashed over oil production cuts which ultimately made matters worse. Since the COVID-19 emerged in Wuhan at the end of 2019, the demand for oil had been decreasing as flights got cancelled and factories lay idle. Saudi Arabia stood their ground to consolidate their position in the oil industry and increased their production despite the low price of oil.

Another factor to the 2020 Market Crash was the trade war going on between the United States and China. That trade war had been going on for a few weeks prior to the Coronavirus Crash. This event was when the investors first started to feel stressed and began to wonder if they should pull back on their investments. There was also a possible recession that increased the investors’ fears. And as proof that COVID-19 should not solely shoulder all the blame for the 2020 Market Crash, the stock markets have surged a couple of times in between the emergence of the virus and the 2020 Market Crash.

Effects of the 2020 Market Crash

It goes without saying that the market crash that happened at the onset of the pandemic set record plunges in the stock market. The 2020 Market Crash started on March 9 when the Dow Jones Industrial Average dipped 7.79% which equates to it losing 2,013 points that day. Investors were starting to flee because of the COVID-19 scare. In addition, Standard & Poor's 500 Index and the National Association of Securities Dealers Automated Quotations dropped 7.6% and 7.29% respectively.

And just when they thought that the worst is over, the Dow Jones Industrial Average dipped yet again on March 12 by 9.99%. Simultaneously, Standard & Poor's 500 Index and the National Association of Securities Dealers Automated Quotations closed at -9.51% and -9.43% respectively. This event is heart-stopping for it came real close to being classified as a correction. These figures effectively ended the bull market that had been going on for 11 years straight.

The extreme health protocols nearly broke the financial market – in The Wall Street Journal’s words. For on March 16, 2020, the Dow Jones Industrial Average, the Standard & Poor's 500 Index, and the National Association of Securities Dealers Automated Quotations closed down at -12.93%, -11.98%, and -12.32 respectively.

Just for the first half of March 2020 alone, the stock market had faced a bear economy. Everybody knows that the stock market is volatile although the market crash took everyone by surprise. The Dow Jones Industrial Average, the Standard & Poor's 500 Index, and the National Association of Securities Dealers Automated Quotations experienced their worst day since 1987. The Standard & Poor's 500 Index and the National Association of Securities Dealers Automated Quotations came close to being classified as a bear market with their loss of -19.23% and -19.41%. However, the Dow Jones Industrial Average did not escape the bear market for it hit a low point of -20.55%.

These events are worrying for those involved in the stock market because corrections and bear markets are mostly driven by the investors’ emotions. This is evidence to the fear that the investors’ have felt over the spread and effects of COVID-19 to the whole world and the economy. Which is also why these market crashes of 2020 did not last and have only three significant dates involved because reason eventually outweighs one’s emotion. As long as there are investors who can keep a sound a sound mind and let their investments be despite the extreme uncertainties, market crashes will never last long.

Up until now though, the global stock market is still experiencing effects of the COVID-19 pandemic. The industry’s landscape has changed a lot since the pandemic began and there are new companies emerging in the market. Some countries’ service and tourism industries are still down due to enforced lockdown protocols and social distancing but technology companies are booming as technology became even more essential as more people have to work and study remotely. The poorer countries are taking this harder as their economies have not been getting better.

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Lee, Y. N. (2020, April 24). 7 charts show how the coronavirus pandemic has hit the global economy . CNBC.

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Stevens, P. (2020b, March 17). Stock market live Monday: Dow drops 13%, Trump says recession possible, trading halted at open . CNBC.

 The main causes and effects of the 2020 stock market crash . (2020, May 19). Daily Monitor.

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