Global recession, predicted to be sparked by Covid-19

The outbreak of the coronavirus (COVID-19) will spark a global economic recession. Due to the limited availability of manufactured goods, raw materials and intermediate products from China, there was a huge vacuum in international trade. In the last two decades, global growth has become more and more focused on the success of China. This might lead to irreversible decisions by companies such as wholesale shifts in the supply chain, supply chain disruptions, particularly in some sectors. China, the industrial hub and global development epicenter, has taken charge of its industrial activities. There are limited supply chains that may stand across the globe without any dependence on China for sourcing. It is estimated that China’s GDP growth will slow down to five per cent this year.

According to the new analysis from United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body titled ‘The COVID-19 Shock to Developing Countries: Towards a ‘whatever it takes’ programme for the two-thirds of the world’s population being left behind’, commodity-rich exporting countries will face a USD 2 trillion to USD 3 trillion drop in investments from overseas in the next two years.

The first sign of disruption would probably be the supply shortage of inputs into the output of a wide range of goods. This would also lead to finished goods shortages, a drastic drop in supply, but also a decline in demand for the items, which would lead to lower potential retail prices. Global commodity prices obviously have fallen in the last two weeks, with the exception of gold, which in the time of uncertainty proves a secure investment device.