International Journal of Management (IJM)

Volume 11, Issue 8, August 2020, pp. 956-969, Article ID: IJM_11_08_087
Available online at http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=8
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.8.2020.087

© IAEME Publication Scopus Indexed

IMPACT OF COVID-19 ON GLOBAL ECONOMY

Muhammad Azizullah Khan
Preston University, Islamabad, Pakistan

Mahboob Ullah*
Al-Taqwa University, Nangarhar Afghanistan

Abid Usman
Iqra National University, Peshawar, Pakistan

Haider Ali Malik

National University of Computer & Emerging Science (NUCES),
Islamabad, Pakistan

Muhammad Kashif Khan

Minhaj University Lahore, Pakistan
*Corresponding Author

ABSTRACT
The Corona virus was first identified in December 2019 in China which spread at
an eagle’s pace in the world, and brought the global economy to its knees. What is the
proxy to COVID-19 in terms of economic crises and how this deadly virus stopped the
economic as well as social activities? The influence of the virus could be seen in two
ways: at one side it affect the close proximity by practicing social distancing which
further led the shutdown of institutions, offices, shopping malls etc. whereas, on other
hand economic actors such as consumers, investors etc unable to predict that how
long the effect of virus spread will last. To address these issues this study examined
the effect of outbreak from 1st May to 31st July 2020 in developed and
underdeveloped economies. This study attempted to analyze the entire measures and
policies (fiscal policies, monetary policies, and health policies) adopted worldwide to
tackle the situation emerged due to corona outbreak. In addition the impact of social
distancing on economic activities and stock market indices was also examined. The
outcomes indicated a negative relationship between lockdown, travel restrictions,
monetary policy, economic activities, and stock market; whereas, positive relationship
was found between fiscal policy, internal movements and economic activities;
however, no significant relationship was found in rise of number of confirmed cases
and economic activates.

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 Impact of Covid-19 on Global Economy

Keywords: COVID-19, Global Economy, Fiscal Policy, Monetary Policy, Public

Health, Social Distancing
Cite this Article: Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman,
Haider Ali Malik and Muhammad Kashif Khan, Impact of Covid-19 on Global
Economy, International Journal of Management, 11(8), 2020, pp. 956-969.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=8

1. INTRODUCTION
In Dec. 31, 2019, Chinese authorities put the attention of World Health Organization
(WHO) towards illness with symptoms of pneumonia cases reported in Wuhan City, Hubei
province, China, with an unknown cause. That mysterious disease was first known as 2019-
nCoV and then named as COVID-19. It is a pandemic corona virus disease that starts from
China and spread all around the world. Corona virus outbreak is a part of frequent patterns of
epidemics. These epidemics may be explained due to rapid globalization mass urbanization
and climate change which further fuelled up the incidence of outbreak. The mobility of
individuals to and from, for work and pleasure has increased than ever before globalization.
The ease of mobility propelled corona virus from China to rest of the world within short
period of two months (Andersen, 2020).
In the year 2019, International Monetary Fund (IMF) was concerned about the worldwide
development of 3.4%, when there was tension of war between US and China, the US
presidential working and Brexit but sudden outbreak of Covid-19 has changed the outlook.
The working and procedures all around the globe were largely affected by the eruption of
Corona virus. The world has been halted with its fear and the organization‟s profits lowered
down due to the existence of COVID-19. In US, a total loss of the S&P 500 top 10 companies
calculated round-about 1.4$ trillion the estimated loss mainly attributed to the rational
behavior of the investors because of the fear of and consequences of Corona virus and its
increasingly fast pace (Financial Times, 2020).
According to International Air Transportation Association (IATA), the air travel industry
would suffer a loss of US$113 billion if COVID continued to spread. The development
projection was downsized by the IMF for the worldwide economy due to the increase in
Corona Virus cases. It also influenced the travel industry to a greater extent. The profit margin
of tourism industry has ceased because the Chinese tourist every year spends billions on
tourism, roundabout 200$ million, loss observed due to the cancellations of flight, hotels,
booking and events (Financial Times, 2020).
China is the largest manufacturing hub, produces maximum products and issues
exportation all around the world. The movement of product through overall deftly chains
immensely decreased since the big manufacturing companies in China were set down and
production was stopped. To combat Corona virus, different countries like Iran, France, USA
and Italy, practiced lockdown by stopping all the economic activities which made difficult for
the goods to be manufactured with the lack of resources. The employees and people have
been suggested to stay at home by avoiding close proximity to stop the spread of Corona
virus. Stay-home practices may accounted for economic recessions in developed countries but
according to the economist‟s view that this recession may plunged the whole world into
global recession (Financial Times, 2020).
As documented by the IMF, it is predictable that the consequences of Corona virus would
lead to severe economic crises that need to be planned before hand for the recovery in 2021
(Georgieva, 2020). Many researchers focused on causes of recessions (Bagliano & Morana,
2012; Bentolila et al, 2018; Bezemer, 2011; Gaiotti, 2013) but the recent pandemics follow

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

different patterns. There are number of examples of recessions such as in the Asian
commitment crises of 1997 occurred with the rise of Thai Baht led economic recession and
financial crisis in Asia (Carter, & Betty 2004). According to Allen and Carletti (2010), the
major causes of financial crises 2008 was due to weak monetary policy that led bubble of
recession followed by subprime mortgage, high leveraging by banking sector and weak
regulatory structure. The economic recession in Greece in year 2010 occurred as a result of
global financial crises, flexibility in monetary policy as a Euro-zone member, and structural
weaknesses in their economy (Bagliano & Morana, 2012). Whereas, the 2016 economic
recession in Nigeria was due to deficit balance of payment, decline in crude oil prices, rise in
petrol prices, pipeline vandals‟ activities, adherence of fixed-float exchange rate and weak
infrastructure (Wang & Youruo, 2020).
This article focus on the impact of Corona virus outbreak on major sectors of the economy
and how much Governments succeeded to assess the economic problems and to save the lives
of their citizens by different measures. Furthermore, this article investigate the effect of
practicing social distancing on economics activates and stock price index. This article would
make contributions in literature in terms that the non-economic factors may cause economic
and financial breakdown in unpredicted ways. The dependence on economy concerns the
future analysis of budgetary constraints should consider human wellbeing and the ways to
counter the effects of the pandemic with shear wisdom.

2. SPREAD OF CORONA VIRUS

Corona virus outbreak is a part of frequent patterns of epidemics. These epidemics may
explain due to rapid globalization, mass urbanization, and climate change which further
fuelled up the incidence of outbreak. The individuals mobility to and from, for work and
pleasure has increased than ever before globalization. The ease of mobility propelled corona
virus from China to rest of the world within short period of two months (Duan, Hongbo,
Shouyang Wang, & Cuihong, 2020). Corona virus outbreak has started in December 2019 and
spread throughout the whole world in short time. According to WHO (2020), US has been
one of the most affected country including Italy, China, and USA till July, 2020

COVID-19 Statistics
Confirmed cases Deaths
160290 4634 35171 17617 28498 9232 46299 8958 30296 39820 5999 3011 5765 14351 96096 8884 910 703449

4,918,420 248,419 349894 192,334 234934 2808076 44433

306,293 280461 18694073

117,792 14,423 861423 521318

84,464 314,786 213,080 190613

Figure 1 Corona virus Statistics up to 31st July 2020 (Source: World Health Organization)

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 Impact of Covid-19 on Global Economy

Recoverd Patients
11916371

1970767
1281660
661471 363751
102450 82166 249297 13352 218491 31851

Canada France India Pakistan South Turkey Russia Brazil South Nigeria Global
Korea Africa

Figure 2 Statistics of Recovered Patients up to 31st July (source: World Health Organization)
World Health Organization (WHO) kept record of each country to identify how the
pandemic is affecting these economies. According to regional estimates by WHO, Europe was
on top rankings in infected cases among American and Mediterranean regions. As the
countries adopted different policies to deal with the pandemic, the rate of infactants and
deaths reduced up-to great extent. The figure 1 given below indicates that the death rate are
high in UK, India, France, Italy whereas, rate of confirm cases is higher in other regions such
as South Korea, Pakistan, Turkey, Russia, Nigeria and so on. The given below figure 2
indicates the rate of recovered patients in different regions. The bar of recovery is highest in
India and Brazil, relative to confirm cases in the said countries.

3. GLOBAL OUTBREAK
As the virus outbreak has started in China, it was believed that it will remain in the boundaries
of China but it spread by traveling, movement of people from one region to other and close
proximity of individuals. Sever economic pain felt by all nations when governments took
measures to combat this outbreak by practicing social distancing, imposing travel restrictions,
closing down all the educational institutions, factories, cancellations of events, entertainment
programs, tourisms etc. to avoid mass gatherings (Elliot, 2020; Horowit, 2020).
In some extent COVID-19 follow the patterns of 2007-2008 crisis, therefore in the
beginning of 2020, many people were of the view that this outbreak would be localized “the
case was based on an assumption that the subprime mortgage crisis would be a relatively
minor problem affecting only the US, but ultimately affecting the global financial system”
(Wang, Youruo 2020).The present situation caused by the sudden disruptions of outbreak is
responsible for demand and supply shocks (El-Erian, 2020).

3.1. Outbreak to the Tourism and Travel Industry

The industries where human interaction was mandatory, was greatly affected by this deadly
virus. Social distancing policies compelled travel and tourism businesses to stop their
working. The issuance of all types of visas was also banned causing the people to stay where
they were. The travel industry has experienced a big halt because it became the primary
source of spread of Covid-19. Despite proper screening measures, COVID infections
managed to ground itself in different courtiers. Considering the situation, countries decided to
ground airplanes and prohibited any kind of travel between the countries, states, provinces,

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

and cities. The measures of quitting airlines also added to the economic issues of the states.
The big airlines were grounded as well, who provided capital income resulting in the loss of
over $200 million. According to IATA total loss estimated from both tourism industry and
travel was round about $113 billion while US airlines industry faced loss of $50 billion, loss
of $820 billion and Pakistan suffered loss of 450 billion, reported by GTBA (Papakyriakou, et
al., 2019).

3.2. Outbreak to the Hospitality Industry

Hospitality Industries and restaurants also suffered high losses due to the outbreak of COVID-
19 since they were one of the most crowded zones to spread the virus. Governments took no
time in closing restaurants to contain the spread of pandemic. Restaurants began home
delivery system in most quantity, but it did not generate much income. Organizations were
greatly influenced by the loss of customers amidst corona virus. The administrative
authorities of almost all countries declared „stay at home‟ call to the employees and people.
Many employees have been laid off to recover the loss of businesses. The ultimate shutdowns
occurred in different zones resulting in the weakening of economic conditions both for
organizations and its employees. The restaurants and hotels that were earning a good amount
were not scared to survive in the era of global pandemic. The estimated loss faced by
hospitality industry due to suspension of business activities for temporary period caused job
loss of about 24.3 million globally, and 3.9 million in the US .The loss suffered was huge for
the organizations in US and Multiple inns the economic instability it caused were more
dangerous than in the incidents of 9/11 and 2008 downturns combined (Timothy, Douglas,
Emery, & Michael, 2016).

3.3. Outbreak to the Sports Sector

The pandemic brought economic difficulties in every sphere of business except few.
Similarly, the gaming business also suffered a great loss with respect to income. Different
games that earned in billions like football, cricket, baseball, tennis etc had to stop to contain
the pandemic. After the news of some players catching infections, the sports areas were
turned down in no time. Big leagues were suspended by the administrative authorities until
the virus was completely wiped off. Not merely this, the Summer Olympic Games 2020 in
Tokyo also postponed till next year. Moreover, the Hockey Championship 2020 was
suspended that was supposed to take place in England, caused millions of loss. Similarly,
Pakistan Super League was also left undecided after the outbreak and the players had to move
to their native countries. In Rugby Matches, the matches were dropped which were supposed
to be played in 2020. Moreover, in baseball, the games played in respective seasons were
delayed in Mexico and Puerto Rico. Also, the Portuguese Government declared the
circumstances as emergency situation and called to turn down all sports matches. The snooker
and swimming piece were also suspended and until the end of pandemic. The cancellations of
event cause the billions losses to the organizations.

3.4. Outbreak to the Oil and Oil Dependent Nations

Directly off the bat in 2020, the expense of oil fell as a result of the oil esteem war among
countries like Russia and Saudi Arabia. The outbreak of pandemic heightened the condition
with the low production of oil. The social distancing measures and lockdown constraints
halted fuel production and other related services required for efficient travel.
The corona virus crisis moreover impacted a wide extent of imperativeness markets, for
instance the coal, gas and economical force source markets, anyway its impact on oil markets
was progressively genuine since it stopped the advancement of people and items, which

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 Impact of Covid-19 on Global Economy

provoked an uncommon diminishing in the enthusiasm for the travel and tourism. Saudi
Arabia suffered with lower earnings by supplying plenty of oil to the market. As a result, the
market was flooded with an overabundance of oil, outperforming enthusiasm during the
COVID-19 pandemic, and along these lines provoking a fall in oil cost.
Furthermore, the world observed high impact of the pandemic on oil-subordinate nation.
The worldwide decrease in oil cost joined the reduction in demand of oil in the universal
market prompted a noteworthy setback in oil income to oil-subordinate nations. The decrease
in oil revenue rise the deficits of current account which further led to destroy the balance of
payments of oil producing countries for example, Venezuela, Angola and Nigeria. The
pressure of worsened BOP also felt on foreign exchange reserves which caused the currency
devaluation in terms of Dollar.
Nations like Kenya, Nigeria and South Africa encountered a decrease in the cost of
petroleum in the neighborhood service points which made their National budget out dated.
The supported decrease in global oil cost concerning the pandemic implied that the current
national spending plan got obsolete for most oil-subordinate nations and must be modified
claiming it didn't mirror latest financial picture and plan was estimated at a higher oil cost
from 2019. Subsequently, the national financial plan of some oil-subordinate nations ran into
enormous shortages which constrained a few nations to it is possible that (I) look for advance
from the World Bank, IMF and different financial institutions to provide to finance for
expenditure shortfalls, or (ii) make another spending plan (budget) to incorporate the current
lower oil prices.

3.5. Outbreak to the Importing Nations

Outbreak and subordinate nations had strong connectivity. Several import-subordinate
countries had to witness unfavorable circumstances during the COVID-19 pandemic.
Countries began to import essential goods from countries like China, India and Japan. Corona
virus outbreak not only affected the exporting countries (producers) but at the same time it hit
the importers (dependent) countries too. China got leading position in manufacturing sector
and many countries import from china. When there occurred oil shortage and shutdown call
for industries raised the price of stocks. As a result of which the prices of imports got higher.
As leading exporting countries such as Japan, China and India stopped the production of
essential items. The dependent countries which are importing these essential items faced
higher prices which further caused inflationary pressure in the society and lowered the
demand. Due to corona virus outbreak many countries faced shortage of necessary items by
banning the movement across the borders. It was difficult to find elective imports after
China's shut down in light of the fact that various countries had midway or totally shut their
edges which covered overall trade by then.

3.6. Outbreak to the Financial Institutions

The respite of macroeconomic incited a climb in slow progress in the monetary part by 250
BP. Corona virus outbreak caused the private bank sector the risk of credit loss as loans were
issued to many SME‟s, large organizations, airlines, hotels, restaurants etc. In the midst of
Pandemic, general adjustments were seen in the volume of banks trades, resulting in the
reduction in payments made by credit cards leading to the fall of ATM case machines all over
the world which puts banking sector in lower or negative profits. This provoked less charges
accumulated by banks which conversely impacted banks' advantage. FinTech associations
were furthermore impacted that can be seen by its lower revenue, profit loss, limited equity
investment which accumulatively makes the banks‟ earnings. At one side the investors start

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

hording of equity which ceased the business but on the other side the virus outbreak gave rise
to online business.

3.7. Outbreak to the Financial Markets

As other sectors of the economy, financial markets also hit by the COVID outbreak.
According to the S&P Dow Jones Indices in six days the global stock market faced losses of
about $6 trillion. Many financial institutions suffered by losses in this wave of pandemic such
as S&P 500 index, FTSE 250 index, Nikkei , Citigroup‟s, Barclays‟ and the stock price of JP
Morgan Chase‟s decline by 28%, 41.3%, 29%, 49%, 38%, 52% respectively. The decline in
stock prices may attribute to oil price war of two leading oil producers i.e. Russia and KSAS
(derived oil prices down by increase in supply of oil) and Corona virus as well.

3.8. Outbreak to the Event Organizing Industry

In event business there are approximately 1.5 billion individuals involved, belonging to 180
countries (Oxford Economics).The event organizing sector contributed to GDP $621.4 billion
every year while providing 1.3 million jobs. The direct revenue generation of this sector is
about $1.07 trillion from different events such as exhibitions, travel events, business events
and so on. In the current situation of pandemic, this sector was badly hit by cancellations of
different events. Big events, concerts, marriages, public parties and other corporate business
occasions were given a full stop. Big events were also suspended with the fear of spread of
Corona virus.
The estimated loss of big events cancellation is about $1 billion. The 2020 Met Gala was
also postponed due to COVID. Other business related to this industry also suffered losses
such as the US biggest ticketing company Eventbrite' point by point that the scene of COVID-
19 really influenced its business position for 2020. Organizations were losing their plans
during the social outbreak. The impact of the emit on in general live occasions was
exacerbated by the social removing framework compelled by two or three governments.

3.9. Outbreak to the Media Outlets

Media industry that involves huge involvement of people also had to be stopped. Media and
film industry caused a $5 billion incident with the outbreak of Corona virus. A couple of
Hollywood film manifestations were suspended uncertainly which suggested goodbye to
theater and film. According to the International Alliance of Theatrical Stage Employees
(IATSE), a normal 120,000 underneath the-line news source positions suffered with the
COVID pandemic. It caused the shutdown leading to the employee lockdown of one hundred
and twenty thousand occupations possessed by its one hundred and fifty thousand people, and
IATSE upheld that news sources should be associated with the orchestrated government
improvement pack. The COVID-19 also adversely influenced the media sources in Italy that
lost million of Euros. There were surveyed disasters of 7.3million Euros in the film screening
section, 7.2million Euros in the assembly room piece, 4.1million Euros in the unrecorded
music divide, 2.5 million Euros in the move practices area and 1.8 million Euros in the show
segment. In the UK18, a normal 50,000 industry advisors were depended upon to lose their
positions. All things considered, unemployment levels in news sources rose to amazing highs,
yet then there were inquiries regarding whether news sources would get some segment of the
masterminded government help group a similar number of authorities fought that news
sources was not an essential driver of the economy, and some battled that news sources
doesn't contribute a great deal to fiscal activities appeared differently in relation to the cash
related and creating divisions.

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 Impact of Covid-19 on Global Economy

3.10. Outbreak to the Health Sector

The outbreak of virus urged the governments of different countries to adjust the working of
health sector. In various countries, government alerted the functioning of COVID-19 in the
best possible manner. China closed all centers in Wuhan for short period of time, such as
Epicenter of corona virus outbreak. Iran's clinical facilities fought to adjust to the corona virus
erupt. The Spanish government in Spain nationalized each private clinical facility and
protection staff the pace of the pandemic increased dramatically. There were sufficient human
administrations workplaces in Singapore and the workers to adjust to the increasing number
of COVID-19 patients, and private crisis centers were inviting and enduring remote COVID-
19 patients. All authorities were incited by the Ministry of Health in Singapore out in the open
and private crisis centers, and specialists to immediately stop enduring non Singaporean
patients. In Ministry of Health of Pakistan also limited the functionality of hospital staff by
closing the OPDs.
The outbreak of COVID-19 furthermore created complications for the pharmaceutical
deftly chain. The manufacturers of Medicine around the world relied strongly upon fixings of
Chinese assembling plants. It is reported that around 60% of the global Active Pharmaceutical
Ingredients (API) was manufactured by China the COVID-19 outbreak. Many drugs
manufacturing companies coped with supply disruptions due to shortage of API‟s and supply
shock as a result of which prices rose up. Various pharmaceutical associations didn't gather
significant proportions of APIs going before the corona virus scene, and thusly, some major
prescriptions were difficult to find. The pharmaceutical associations that had accumulated a
huge proportion of APIs in their stockroom would not sell them due to a distrustful dread of
missing the mark on arrangements and other were glad to sell exactly at a particularly huge
cost.
Financial institutions like insurance companies also got the effect of corona virus
outbreak. In US many companies ran out of credit and failed to pay out the hospitals.
Government considered adding all these companies in federal relief program. According S&P
500 health care index fell down by 7% as rational response of the people towards health
sector in terms of Corona virus outbreak.
Moody's assessing office limited the not-for-profit and open therapeutic administrative
zone's perspective from stable to shaky as a result of spread in the corona virus ailment. The
Moody's rating agency predicted that in the wave of pandemic public health care organization
may felt downturn from stable position as it was in 2019, they may face lower cash inflows
due to elective surgeries cancellations, rising expenditure and uncertainty in the health sector.
Investing banks and medical equipment supply firms may try to get higher profits by rising
prices of their products. This behavior of drug supplying companies, lack of equipment‟s,
shortage of vaccines, limited number of hospitals, beds and isolations units also become the
cause of increase number of deaths and the Corona patients.

3.11. Outbreak to the Education Sector

After the declaration of Corona virus as deadly virus by WHO, the government of many
countries directed to close the entire educational institutions (academies, school, colleges, and
universities etc.) till next governmental orders. At one side this sector suffered from financial
losses, on the other side also the ripple effect of this virus outbreak felt by the students.
Advanced countries started to educate their students by providing online classes but this way
of teaching did not bore fruit according to the expectations in underdeveloped countries and
the reason of this was lack of online learning platforms, technology, training of online classes
and power outage. According to rating agency reported US educational institutions position

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

going from stable towards negative by 30% because many institutions were unable to start
online learning programs.
Moreover, UNESCO documented that the corona virus effected the planning of 290.5
million understudies (students) across the globe. The government schools in USA were
closed, Australia also closed schools whereas, countries like Afghanistan, Pakistan, India,
Bangladesh, Italy, France, Israel, Egypt, Nigeria, Egypt, and Spain also closed
schools/educational institutions, which grounded to fire a greater percentage of employees
from their jobs. The association of Northern Ireland's postponed all examinations in its
schools and colleges. Several U.S. based colleges that operate an evaluation abroad program
taught understudies to come back from Spain, Italy, and France as the corona virus eject got
remarkable in those nations. The suggestion of online learning system succeeded in advanced
countries only. How numbers were low doesn't suggest that a transition to huge levels is past
the domain of creative mind following a COVID energized daze. Clearly, it might come back
to the past condition after grounds are resuscitated and yet, it is possible that teachers and
understudies will have expanded an example of electronic learning, and for some it will have
been viewed as effective.

4. COVID-19 – DEVELOPED VS. UNDERDEVELOPED ECONOMIES

Corona virus sharply spread around the globe by hitting advanced economies as well as
underdeveloped economies. Large number of population has been affected by the pandemic
virus outbreak traced by China. The Wuhan City of Hubei province was first impacted by the
virus outbreak. The virus transmission channel is human being as many visitors flew from
China to other parts of the world become the carriers of the virus. This mobility of individuals
either for work or for tourism transmitted the virus from one person to other. The Corona
virus hit various economies including developed like UK, US, France, Germany and so on but
the effect was sever upon less developed or under developed economies such as Afghanistan,
Pakistan, India, Bangladesh etc.
Pakistan is the only country where virus attacked lately by the return of Pakistani
pilgrimages from Iran and Saudi Arabia. For the containment of virus Govt. quarantined those
visitors in Taftan after many visitors moved to their homes. The virus spread due to several
reasons such as the lack of awareness as large number of population belongs to rural areas, the
non-serious attitude of people towards social distancing, family system and close proximity
which propelled the virus by transmission from person to person.
The virus first diagnosed in a patient arrived from China latter on pilgrimages from Iran
(the first Middle Eastern country impacted badly by the pandemic virus) appeared positive.
The infections number apparently raised but it is much lesser as compare to most of the
advanced economies where situation has been worsening day by day. Pakistan is doing best to
contain the virus under its limited resources as an under developed country. As containment
measures schools, universities, all institutions and Madaris close down, shuttering industries,
emergencies in hospitals, screening at air ports and partial lockdown in the country. This
period will be considered as summer break up to 31 May 2020 to avoid educational loss as
online schooling system is not well-developed in most areas which are directed to be
developed in the period of summer break.
Partial lockdown decision was better in a way as large number of individuals depends on
daily wages. To avoid food shortage and easy availability of food to all individuals, govt.
ordered grocery shops would remain open. Setting of Quarantine centers is a good step to
contain the COVID-19. Apparently, the taken measures have been successful up to some
extent. Necessary measures are to provision of national health services and individual support
funds. Short term response/impact shuttering industries, business, institutions impact the

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 Impact of Covid-19 on Global Economy

economy negatively as supply chain disruption affected the production and productivity due
to the inventory been over, inventory exhausted. Long term response /impact are to rebuild
the individual‟s confidence level in portfolio investment. Stakeholders risk their portfolio as
an anticipated virus impact. Prime minister announced 3000/month relief fund providing to 7
million daily wagers. Under these programs Rs. 12000/- per month given to the needy
families.

5. POLICY ADAPTATION RESPONSE

5.1. General Approach towards Policies
Different countries adopted different strategies to tackle the problem of corona virus outbreak.
The global policy makers categorized these policies in four groups. These groups are
monetary policy, Fiscal policy, Public health policy, and Human control policy;

Table 1
Policies Policy Response
Monetary Policy Grants, increased liquidity, open market operations, lowering rate of
interest and easy credit flow for banks.
Fiscal Policy Stimulus packages, welfare support programs, income support packages,
subsidies.
Public Health Policy Avoid gatherings, partial and smart lockdown, quarantine, border
closures, social distancing
Human Control Release of prisoners, Banning travels, closing educational institutions,
Policy strictly following SOPs.

5.2. Issues and Challenges regarding Policies - A Challenging Task

While formulating policies to dealt with the problem of the Corona virus outbreak, it was
challenging work for the policy makers what to save first? economy or the lives of individual,
because the two do not go side by side but are two opposite sides of the coin. If policy makers
try to save the lives first the business, social and human activities have to be stop by
practicing lockdown. On the other hand if economy is preference then the close proximity
may spread the virus more rapidly. By the orders of WHO every country gave priority to the
lives of their citizens over economy. Lockdown was a requirement to contain the spread of
pandemic which was undoubtedly a threat to the economy. The Governments around the
globe encouraged the people to stay at home no matter what happens. The countries were
showing rapid increase in pandemic and therefore businesses and organizations had to be
given a pause.

5.3. Contradictions and Criticisms

Policies made for the betterment of the society but these policies found inefficient in some
aspects such as monetary policy didn‟t succeeded in stopping recession because people were
scared in making purchase/investments. Expansionary fiscal policy for economic activates
also failed due to the practicing social distancing.

5.4. Expansionary Fiscal Policy and Sectorial Dispute

Making sense of which section will get some part of the redesign pack and which division
won't get the lift group moved toward a strategy driven issue in specific countries‟ concern.
Providing relief packages from Government to different sectors of the economy became
dispute among political parties. Sectors unable to receive sufficient portion from the package

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

were on protest such as manufacturing sector, hospitality sector, media sector, banking sector,
pharmaceutical sector, and education.

5.5. Avoidance of Less Contributed Sector

Practice of social distancing by the governmental orders, shutting down of restaurants, hotels,
parks, pubs to avoid gatherings cause downfall to the hospitality industry. The profits of
businesses related to hospitality industry go negative. The fear of Corona virus stayed people
home. It crushed various associations in the neighborliness business in habits that were not
imagined, and the organization fail to accept risk for the failure of little and gigantic
associations that didn't persevere through the corona virus erupt on account of the lawmaking
body constrained social isolating technique and restrictions.

6. METHODOLOGY
The empirical analysis was made to investigate the impact of social distancing measures on
economic activities. The data for estimation used for three months (1st May, 2020 to 31st July,
2020), from four different regions i.e. North America, Africa, Asia (Pakistan) and Europe.
Data collected from stock markets of selected regions for lowest stock price, highest stock
price, closing stock prices, Purchasing Managers Index (PMI). The collected data was used to
investigate prevailing economic trends in the manufacturing and service sectors. In order to
analyze the impact of social distancing on economic activities, PMI is deployed as proxy.
Three explanatory variables: Restriction on Internal Movement (RIM), Number of Lockdown
Days (SDL), and International Travel Restrictions (IR) are used, whereas, Fiscal Policy
Spending (FP), Monetary Policy Decision (MP), and number of COVID‟s Confirmed Cases
(CC) in the aforementioned four regions are controlled. To minimize the skewness in the data
distribution of FP and CC, natural logarithm of FP and CC are taken. Oxford COVID-19,
Government Response Tracker database is the data source for CC, RIM, IR, FP and MP. The
SDL was calibrated as the lockdown days are assigned values from 1-5, to breakdown the
SDL influence MP.

6.1. Model
This is a multivariate model demonstrated as follows that uses a least square relapse. To
investigate the effect of lockdown days on economic activities and stock price indices
followed by (Peterson and Thankon, 2020) using same dependent and independent variables
with the addition of Pakistan Stock Exchange (PSE) index. The PSE data included along with
the four stock markets (FTSE 500 index (UK), SP 500 (US), the Nikkei 225 (Japan) and the
SA Top 40 index (South Africa).
= +∑ + + ln𝐼𝑅𝑖, + ln𝑀𝑃𝑖, + ln𝐹𝑃𝑖+ ln𝐶𝐶𝑖 ) + 𝑒𝑖
= +∑ + + ln𝐼𝑅𝑖, + ln𝑀𝑃𝑖, + ln𝐹𝑃𝑖+ ln𝐶𝐶𝑖 ) + 𝑒𝑖
Where,
EC = General Monetary Exercises Level
SM = Securities Exchange Factors the log vector: CP, ∆CP, LP and HP
t = Week Business Day
i = Regions
= Intercepts capturing the effect of all other variables which are not included

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 Impact of Covid-19 on Global Economy

Table 2 Impact of Social Distancing Policy on Stock Markets and General Business Activities
(1) (2) (3) (4) (5)
Closing Price Opening Price Lowest Price Highest EC
(CP) (OP) (LP) Price (HP)
SDL -0.112*** -0.113*** -0.111*** -0.111*** -0.587***
(-4.86) (-4.84) (-4.86) (-4.92) (-3.21)
RIM 1.368* 1.385* 1.324* 1.431** 30.355***
(1.91) (1.96) (1.85) (2.11) (5.35)
IR -0.581*** -0.578*** -0.586*** -0.572*** 2.708***
(-4.98) (-5.04) (-5.11) (-4.98) (2.94)
MP -1.106*** -1.112*** -1.095*** -1.124*** -11.514***
(-6.11) (-6.21) (-6.11) (-6.31) (-8.06)
FP 0.0002*** 0.0004*** 0.0002*** 0.0002*** 0.002***
(40.66) (41.1) (41.06) (41.43) (21.62)
CC 0.684*** 0.681*** 0.692*** 0.673*** -1.462
(4.36) (4.38) (4.44) (4.35) (-1.18)
R2 83.46 83.86 83.95 83.84 61.37
Adjusted R2 82.28 82.71 82.72 82.66 58.72
Observation 75 75 75 75 76
Note: *** indicates 1% significance level, ** 5% significance level, and * 10% significance level. T-
values are documented in Parentheses.
The outcomes of this study are in line with the study of (Perme, Maja Pohar, & Damjan,
2019; Peterson & Thankon, 2020; Wang, Youruo, 2020). Although, one more stock market
included in the study but it doesn‟t put any change in the results. The results revealed that
coefficient of days of week and restrictions on internal movements found significant at 0.5%,
where negative relationship found in lockdown days and economic activities and stock indices
i.e. Highest lowest prices and closing stock prices. Coefficient of IR was also in negative
relationship with EC and stock prices. These results showed that the restrictions imposed by
the Governments on international travels impact the economic activities and stock prices
negatively. In case of policy implication, MP is in negative relationship while FP sending‟s
found positively related to economic activities and stock prices. In case of CC, no significant
effect of CC on EC and stock prices is found that indicates that there is no significant
relationship between number of confirmed cases and economic activities.
The findings indicated that the extending number of lockdown days, monetary policy decisions and all
travel confinements constrained at the apex of the Corona virus crisis affected the level of general
economic activities and stock prices fluctuations, whereas there is direct relationship between fiscal
expenditures and Economic activities. However, number of positive cases indicated a positive
relationship with stock price indices. In mitigating the effect of the Corona virus outbreak, fiscal
policy found efficient as compare to monetary policy because in short run adopting accommodative
policy by central bank may cause inflationary pressure in the economy.

7. DISCUSSION
This study analyzed the results of the Corona virus out break and its prolonged effect on
different aspects of society/sectors. It is documented that almost all of the countries across the
globe, have been trying their best to tackle with this outbreak by making different policies. It
was great challenge for policy makers to make appropriate policy to save the economy and
individuals lives. Due to the Corona virus, the world plunged in recession. The cause of
recession up to some extent was social distancing policy that isolated the people at home and
all the economic and social activities stopped. The findings based on the three month data
revealed that increase in number of lockdown days reduced economic activities and effect
stock price indices negatively.

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 Muhammad Azizullah Khan, Mahboob Ullah, Abid Usman, Haider Ali Malik and Muhammad Kashif Khan

There was big pressure on the shoulders of policy maker in various countries in response
to the Corona virus outbreak. Subsequently, various councils chose brisk system decisions
that had expansive positive and negative ramifications for their individual economy various
countries dove into a downturn. Social distancing and lockdown limitations were imposed in
different nations, and there have been critics that such social techniques can trigger a
downturn. Social distancing found beneficial in terms of saving lives of many individuals. Big
companies like Google called „Work from Home‟ strategies to combat Corona virus.
Authorities in various countries maintained a comprehensive social evacuating technique,
accusing the aftereffects of social isolating on the economy. The downturn, that followed
various countries experienced, was an impression of the inconvenient choice that policy
makers expected to make in picking whether to save the economy before saving the people or
to save the people before saving the economy; various countries picked the last referenced.
There were different responses about the policies adopted by different Governments such as
these policies were unnecessarily speedy, inopportune or lacking, and that the systems denied
each other in specific areas, for instance, the accommodative money related procedure asked
fiscal administrators to take part in budgetary activities while the lockdowns and social-
isolating (stay-at-home) game plan shielded financial activities from happening.
On the awe-inspiring side, the corona virus-actuated general prosperity crisis made an
open entryway for certain organizations to roll out suffering improvements in the general
prosperity division. Countries like the UK and Spain fixed their general human
administrations system, and fixed various insufficiencies in open establishment, for instance,
the advancement to online guidance, transportation structures and the disease
acknowledgment structures in open clinical facilities. A few of governments used the crisis as
an opportunity to fix the fiscal system and the monetary structure with the masterminded
regulatory lift pack. The current study has few limitation and delimitation. The short time for
analyzing the available data. The effect of govt. policies adopted in the Corona virus outbreak
can be analyzed for longer period of time for better understanding. The study can be extended
to capture the effect on all the sectors of the economy which left to address in this study. The
two dimensional study can be done in future as the impact of policies on informal economy
and response of financial institutions to the adopted policies in crisis like corona virus
outbreak.

8. CONCLUSION
The results indicated that coefficient of days of week and restrictions on internal movements
found significant at 0.5%, whereas negative relationship found in lockdown days and
economic activities and stock indices. International travel restriction was also in negative
relationship with economic activities and stock prices. These results indicated that the
restrictions imposed by the governments on international travels impact the economic
activities and stock prices negatively. In case of policy implication, monetary policy is in
negative relationship while fiscal policy and found positively related to economic activities
and stock prices. In addition, no significant effect was found of confirmed cases on economic
activities, however stock prices is found that that there is no significant relationship between
number of confirms cases and economic activities.

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