What’s happening to our economy?

Over the last few weeks we have witnessed significant drops in worldwide stock market indices due to continued investor fears over the Coronavirus outbreak.

Despite two cuts to the Bank of England Base Rate, which now sits at a historic low of 0.1%.  The FTSE as of 23 March 2020 again dropped by a further 5%. This downtrend was mirrored across Europe and these latest drops came after the US Senate failed to pass a $2bn (£1.69bn) funding package to combat the impact of coronavirus.

This decline means that the FTSE has dropped a total of 31% since the start of the year, with the S&P 500 dropping 39% and the Euro Stoxx 50 32% over the same period. These systematic drops have wiped billions from the value of private investors investments and pensions and the sheer uncertainty of the situation means the length and depth of this depression is unknown.

What’s the impact?

From an economic perspective, the key issue is not just the number of cases of COVID-19, but the level of disruption to economies from containment measures. This is not a blip, this is a situation that has never been encountered in advanced economies. Many countries are now locked down with a corresponding restriction on the supply of goods, services and free movement. With companies also shutting their doors temporarily, economists are in agreement that recession is looming; it begs the question ‘how low can we go?

Conclusion

The full economic toll of the outbreak will not be clear for months. But there is mounting evidence that it will be severe. However, we cannot forget that the coronavirus outbreak is first and foremost a human tragedy, affecting hundreds of thousands of people.