IMPACT OF COVID 19
ON THE FACTORS OF
PRODUCTION
Development Economics
Term Paper
Submitted By:
Ahmed Siyam Bin Ferdous
Roll: B17231073
Table of Contents
INTRODUCTION ............................................................................................................................................. 3
Current Scenario ........................................................................................................................................... 3
Possible Economic Impact............................................................................................................................. 4
Immediate Effects ......................................................................................................................................... 6
Impact on Land ............................................................................................................................................. 6
Impact on Labor ............................................................................................................................................ 7
INTRODUCTION
the effect of the COVID-19 in terms of loss of human lives is priceless, but its impacts on the
global economy and sustainable development scenarios are also disturbing. For instance, the IMF
predicts that the world will enter into a recession worst than the Great Depression of 1930, with
a preliminary estimation of the economic impact of the crisis at US$ 2 trillion.
From the look of things, based on observations of ket actions taken by different governments,
individuals/households and businesses, one can draw a couple of inferences:-
1. Closing of borders and travel ban has certainly affected travel and I guess to some extent,
trade. Based on this, we can expect the (X-M) variable to be impacted, some countries more
than others.
2. Self distancing and lockdowns will certainly have an impact on employment, especially in
economies with a large chink of non permanent workers like the USA. Regardless, consumer
confidence will be impacted and may impact consumer spending variable. Durable items will
certainly come under pressure.
3. Spending by private companies normally lags consumer spending, net we can expect this
variable to be impacted.
4. Spending by government on the other hand, especially for countries with strong fiscal
positions and credit ratings will certainly go up.
Consequences of cornavirus will be beyond economic ones. In adition of the economic recession,
people are living in high degress of stress. We know that stress has bad consequence on the heath
difficult to evaluate on short-run.
Current Scenario
Currently, many economic data indicate that due to the development of the SARS-CoV-2
coronavirus pandemic causing Covid-19 disease, many companies, enterprises suspend
operations or entrepreneurs are closing their companies and service facilities in an increasing
number of sectors and industries. Therefore, currently economic growth is slowing down in many
countries.
Increase of unemployment and public deficit, increase of bankruptcies (bars, hotels, tourism
sector in general), decrease in investment due to a lack of confidence in general, increase in
productivity (intensity of work in a hour) motivated by a rationale of "catching up the pre-covid-
19 economic state of affairs", economic appreciation of certain sectors (certain digitalized
services in the cultural sector, e.g. music merchandizing) and companies (operators, data
platforms, social networks etc..), increasing use of crowdfunding, reduction of consumption
ratios, decrease in global trade via the erection of trade barriers (tariffs).
Health is fundamental to a prosperous productive society, whereas panic and illness can stifle
production, consumption, recreation, travel, and overall well-being (Marin, 2017; Adeola &
Evans, 2018; Lawanson & Evans, 2019; Nwaogwugwu & Evans, 2019; Fourie, 2020). Health
disasters such as the Ebola virus in West Africa, the Middle East Respiratory Syndrome (MERS)
outbreak in the Republic of Korea, and the rise of COVID-19 not only have global health impacts
but also wide-ranging socioeconomic disruptions. For example, during the Ebola virus in West
Africa from 2013 to 2014, “government revenues declined across the board, including direct
taxes on companies, VAT receipts, and indirect taxes; Additionally, decline in private and foreign
investors' confidence led to financing gaps of more than US $600 million over the two years.
These impacts cut across many sectors and undoubtedly have long-term consequences” in
Guinea, Liberia and Sierra Leone (Smith et al, 2019). In addition, after killing at least 800 people
and infecting more than 8000, the total global economic loss due to SARS was estimated to $40
billion. Much of this impact was due to consumer fears given the ease of transmissibility of the
virus in public settings. Also, the wider economic impact of the 1998 Nipah outbreak in Malaysia
was estimated at US $582 million (Dimmock, Easton & Leppard, 2016). In the same fashion, the
incidence of the COVID-19 is growing at a disturbing rate with significant impacts on global
economies and public health. According to Bloomberg, China's first‐quarter GDP growth may
drop to 4.5%; the global GDP is also expected to decline by roughly 0.42% in the first quarter of
2020. Economists have estimated that, without urgent global actions to curtail the virus in time,
China is expected to lose up to $62 billion in the first quarter of 2020, while the world will lose
over $280 billion. Ayittey et al (2020) compared these values to the World Banks estimate that
even a weaker flu pandemic, such as the 2009 H1N1 viruses, would still wipe 0.5% off global GDP,
which is approximately $300 billion. During the 2003 SARS outbreak, tourist arrivals in Hong Kong
dropped 68% just two months. In South Korea, where an introduction of MERS caused a brief
2015 outbreak, the number of international visitors dropped by 41% in mid-summer. The public's
contagion fear and governmental overreaction closed down many public events and stifled daily
activities (Lee & Ki, 2015). The H1N1 influenza resulted in a US $2.8 billion hit to Mexico's tourism
industry, with a loss of one million tourists over a fivemonth period due to contagion fears. In a
similar fashion, in a report on the COVID-19 outbreak, the United Nations World Tourism
Organization [UNWTO] (2020) has emphasized a decline in international arrivals and receipts in
2020, revising its 2020 prospects for international tourist arrival.
Possible Economic Impact
To a negative growth of 1% to 3%, meaning an estimated loss of US$ 30 to 50 billion in
international tourism receipts. In fact, the impacts are estimated to be felt across the whole
tourism value chain. For example, according to Global News (2020), bookings are down from
China to Canada by about 70 per cent between October 2019 and March 2020 as many airlines
have restricted the number of flights to the country, and several Canadian tourism marketing
agencies have pulled out all their ad money from China. Morbidity and mortality values may
indicate severity of COVID-19 impact, but may not allow appreciation of the full consequence of
impaired productivity from illness for a person, their household or their community. Impacts may
involve psychological, educational, or professional losses on the individual and household. The
high death toll during the West Africa Ebola outbreak trigger expanded social and household
economic impacts, stifled growth rates, and lost wages due to inability to work or contagion fear,
increased poverty and food insecurity, lost education and lost jobs. In a similar fashion, if the age
group of 15–44 years, those engaged in the labor force and parents of young children, account
for majority of COVID19 infections, the impact on economic activity, poverty and food security
could be substantial. Incomes could drop significantly during the outbreak; consumption by
households could decrease and the prevalence of undernutrition rise. Closure of schools,
resulting in weeks of lost education, could expose children to several types of child abuse
(including sexual exploitation and violence against girls) with long-term effects such as emotional
trauma and unwanted pregnancies. Economic implications of the COVID-19 can be detrimental
not only to public health systems but to trade and travel, food and agriculture industries, various
market types and retail chains, among others. These sectors are not traditionally linked to disease
impact assessments, yet they are confronted with the threat of the virus wherein consumers are
too fearful to access their services because of supply chain or their workforce is compromised.
There are many ramifications of the direct and indirect economic effects of the COVID-19:
preparedness and prevention (practices that mitigate risk), the event itself (e.g., business
continuity, supply chain disruption, public contagion avoidance behavior, trade and travel bans),
and the event aftermath (e.g., permanently closed markets, long-term employment loss, impacts
of lost education or being orphaned, etc.). There are increasing numbers of confirmed deaths.
These numbers are expected to surge when indirect costs due to lost productivity and
comorbidities are taken into consideration. The escalating pandemic has the potential to
overwhelm healthcare systems and threatens to reverse the gains of economic development in
many emerging markets. Considering the grave human, societal, and economic consequences,
there is a critical need for health professionals and policy makers to recognize the magnitude of
the COVID19 epidemic and the potential devastation it may inflict, particularly in the developing
world.
Covid-19 has caused global demand for rental properties to plummet as the impact of the
pandemic on business activity, personal living and economic growth continues to impede
overseas assignments. The scale of the coronavirus and worldwide quarantine measures have
led us into uncharted territory during a time in which businesses are as globally connected as
they have ever been. Lockdown measures have prompted the repatriation of many assignees,
while those remaining in their host locations face uncertainty in their current tenancy
agreements. The future of new and planned assignments is ambiguous and mobility managers
are now challenged in deciding when new tenancy agreements should be secured and signed, if
at all. Although there is no clear picture for how the global rental market will recover from
Covid-19, some insight can be gained by drawing on examples of how selected countries are
currently adapting, as well as reviewing expert predictions for how these will impact the future
of the market.
Immediate Effects
As more and more countries entered lockdown conditions, many governments issued advice to
expatriates and foreign nationals to return to their home countries. Some even implemented
urgent border restrictions for non-residents and flight cancellations, such as in Australia, which
left many expatriates abroad struggling to return and prompted a number of these to abandon
their properties.
The lockdown process has also meant major restrictions on the normal estate agent and tenant
processes, reducing the amount of rental transactions taking place. Many brokerages are shut
and those still operating are doing so with the caveat of online property viewings rather than
physical viewings. Renters in the United Kingdom have been instructed to delay moving while
lockdown measures are in place, where possible. The compliance landscape is also tightening in
some locations. For example, landlords in Miami have been operating increased background
checks to avoid renting to prospective tenants that are unable to pay or claiming to be unable
to pay.
The economic impact has already taken its toll in some locations as residents are no longer able
to pay their rent. Rents in Hong Kong are reported to have fallen in high-end districts as
residents either leave the country or have less job security. The effect has been seen at the
lower end of the market too, as many young professionals have lost their jobs.
Impact on Land
A range of interventions has been sanctioned by governments to mitigate the financial hardship
faced by tenants and landlords and secure some short-term market stability. These have
primarily been reported in Western economies, though newly announced policies are coming
into force regularly.
The most common of these interventions is emergency legislation to either ban tenancy
terminations or require landlords to extend notice periods, often by three months. Varieties of
this legislation have been introduced across the world. The Irish government enacted
the Emergency Measures in the Public Interest (Covid-19) Act 2020 which introduced a blanket
ban on both tenancy terminations and rent increases, even if either was served before the
emergency period. Spain had a similar approach in banning evictions and rent hikes but
announced a raft of other measures as well, such as extending all leases for six months while
the state of emergency is in place. In Germany, tenants that can prove they have been
financially affected between April 1st and June 30th cannot be evicted but will accrue debt on
the missed payments. This debt has a repayment date of 30th June 2022 and is charged with an
interest based on the legal interest rate of 9%.
To alleviate the income loss from these interventions, some countries have introduced relief for
landlords, such as mortgage holidays for buy-to-let landlords in the UK. Other options for
landlords are limited to bankruptcy or providing rental concessions for tenants no longer able
to pay, such as rent holidays or suspensions. Australia has recently announced a $440 million
six-month support package to allow landlords and tenants to negotiate on rental payments
when households have lost at least 25% of their income. Landlords in Sydney are even reported
to be offering one month’s free rent to attract tenants, with data showing a 300% rise in vacant
rental listings over the last month.
Impact on Labor
The world is now struggling to combat the deadly coronavirus pandemic. The virus has already
reached every corner of the world. In many cases, it is spreading at different paces and
intensifying in other regions. The pandemic has brought severe adverse impact on every sector
of the global economy as well as education and put the unemployed youth into deep trouble.
Being a developing country, Bangladesh has been fighting to create adequate job opportunities
for its people, including youth for long. Despite a remarkable economic growth in recent years,
the country has yet to do so, raising questions about the quality of the growth. As Bangladesh is
gradually moving forward to adapt to the Fourth Industrial Revolution or Artificial Intelligence
(AI), a lot of manual workers have already started losing their jobs due to increased
automation. And now the Covid-19 has intensified their woes.
Since the outbreak of the pandemic, newspapers have published a series of reports on job
losses due to shutdown or slowdown of economic activities. The job loss put a large number of
young people into depression. The young job seekers are seen to pass their time with severe
anxiety thinking the post-Covid-19 impact on the job market.
According to the Bangladesh Bureau of Statistics (BBS) 2019 report, the unemployment rate in
Bangladesh is 4.19 per cent. Experts and economists are now predicting that the rate will jump
in the coming years. According to a World Bank report, one of every three graduates remain
unemployed in Bangladesh.
The appearance of emerging technology, globalisation, and now Covid-19 has seismically
disrupted labour markets for youths and their chances of right, long term and meaningful jobs.
Our youth labour market is highly vulnerable to economic cycles. At the same time, the experts
said the youth employment is going to hit more negatively by economic shocks in the period of
economic downturn. As a result, many jobs have already vanished while the new jobs leave
behind many young aspirants. According to a recent joint report of Asian Development Bank
(ADB) and International Labor Organization (ILO), the youth unemployment rate was 11.9 per
cent in 2019 and likely to increase to 24.8 per cent this year in Asia and the Pacific. Unemployed
youth are already falling into deep anxiety and depression, which drive them to loss behavioral
and emotional control. Many of them have also become drug abusers. In an extreme case, a
few even opt for committing suicide.
Bangladesh Civil Service (BCS), nowadays, has become considered as the most preferable and
secured job for the youth regardless of their background as the country doesn't have sufficient
placement in other standard job sectors. On December 31, 2019, Bangladesh Public Service
Commission (BPSC) issued 41st BCS job circular, but the preliminary examination has remained
postponed due to the pandemic.
Meanwhile, the academic life of the students will be a prolonged one. Though educational
institutions have started online classes, the students are going to face acute session jam due to
Covid-19. The deadly virus is now killing the age of many youth aspirants to build their career in
government jobs, including the BCS.
According to section 14 of BPSC Regulations, a general applicant must have an age limit of 30 to
take part in the BCS examination, which is 32 years for children and grandchildren of freedom
fighters. In this backdrop, government job seekers are in tensed about the age limit of BCS for
which they are now demanding to increase the age limit, although the demand is nothing new.
Over the years, university students have waged demonstration and conducted an advocacy
campaign for raising the age limit. Recently, a writ petition was filed with High Court in this
regard. Moreover, many prospective BCS applicants, who have finished their studies, would
likely to cross the maximum age threshold soon.
Age limit in a government job has remained a debatable issue for a long. Along with more than
150 countries, India and some other south Asian countries have raised the limit to 35 years for
the entrance in government service.
The authorities have, however, assured that they would consider relaxing the age limit for
applicants, who cross the threshold during the shutdown. A fresh circular will also be released.
The question remains how the government will address the issue.
Bangladesh is committed to achieving the Sustainable Development Goals (SDGs) by 2030 and
moving forward to become a developed country by 2041. For that, the incumbent government
is taking significant steps to ensure decent jobs for the youth by creating different job
opportunities by wage-earning and self-employment. Against the backdrop of Covid19, the
government needs to come forward to create a special department with the public service
commission to evaluate the unprecedented situation and take appropriate steps in this regard.
A reform in BCS recruitment system is necessary now, and the age limit can be considered at
least for a particular period to combat this evolving coronavirus situation.
Impact on Capital
Current estimates show that in 2020, the global economy will probably slow down its growth by
several percent. compared to the previous year. Therefore, it is necessary to permanently
improve and increase the scale of anti-crisis socio-economic policy planned, developed and
implemented both at the level of individual countries as well as within coordinated international
activities. In some countries, pro-development, interventionist, anti-crisis programs have already
been launched to save business entities from mass bankruptcy by introducing additional
temporary tax breaks or exemptions, subsidies to employees' remuneration under fiscal policy.
On the other hand, as part of monetary policy, central banks reduce interest rates, launch loans
for commercial banks on preferential terms, buy lost loans from commercial banks and / or
implement sovereign bond buy-back programs to maintain liquidity in the commercial and public
financial system of the state. However, the question arises how many months of this type of high
budget aid programs can be implemented? To what level can the budget deficit and public debt
be increased as part of the implementation of this type of anti-crisis programs helping the
economy, enterprises and citizens? To what level can the government allow inflation to rise as a
result of this type of economic assistance programs? Can the current economic crisis in many
countries turn into a crisis of public finances? If it is possible, what anti-crisis economic reform
program should be currently planned and implemented in these countries to avoid a significant
increase in the risk of potential loss of liquidity in the state's financial system? In connection with
the above, one more question arises: Do you agree with the thesis that as part of limiting the
scale of pandemic development through the use of forced home quarantine and forced
suspension of economic activity in a significant part of branches and sectors of the economy, it
is possible to run the above-mentioned government anti-crisis for many months at the same time
programs to help the economy and not paying attention to financial costs, not paying attention
to the growing scale of public debt of the public finance system? Therefore, the impact of the
SARS-CoV-2 Coronavirus pandemic causing Covid-19 disease on the global economy is very large.
The high probability of potential recession of the global economy and in many countries in 2020
is currently estimated. Well, in 2020 it is no longer trade wars that will be the main factor in the
decline in international trade, international capital flows and other factors of production,
international economic cooperation. In 2020, the main factor behind the decline in international
trade, international capital flows and other production factors, international economic
cooperation, etc. will be the development of the SARS-CoV-2 Coronavirus pandemic causing
Covid-19. What do you think about my research thesis? Many current economic data already
confirm the thesis that probably now (April 2020) in many countries an economic crisis begins,
which may after a few months turn into a debt crisis of the state's financial system. If this situation
occurs in many countries, then in 2020 the global economy will most likely slow down its growth
by several percent. compared to the previous year. In connection with the above, other research
questions arise: Can the currently beginning economic crisis in many countries turn into a crisis
of public finances? If it is possible, what anti-crisis economic reform program should be currently
planned and implemented in these countries to avoid a significant increase in the risk of potential
loss of liquidity in the state's financial system? The issue of the impact of the development of the
SARS-CoV-2 Coronavirus pandemic on national economies discussed above is developmental,
dynamically developing, with every day more important data appear that may affect the
specificity, nature and scale of the correlations analyzed.
