Coronavirus will bankrupt more people than it kills — and that's the real global emergency

Local stocks plunge to 6,300 level as PH confirms more coronavirus cases

Coronavirus will bankrupt more people than it kills — and that's the real global emergency

We may look back on coronavirus as the moment when the threads that hold the global economy together came unstuck.

Coronavirus economic danger is exponentially greater than its health risks to the public. If the virus does directly affect your life, it is most likely to be through stopping you going to work, forcing your employer to make you redundant, or bankrupting your business.

The trillions of dollars wiped from financial markets this week will be just the beginning, if our governments do not step in. And if President Trump continues to stumble in his handling of the situation, it may well affect his chances of re-election. Joe Biden in particular has identified Covid-19 as a weakness for Trump, promising “steady, reassuring” leadership during America’s hour of need.

Worldwide, Covid-19 has killed 4,389 with 31 US deaths as of today. But it will economically cripple millions, especially since the epidemic has formed a perfect storm with stock market crashes, an oil war between Russia and Saudi Arabia, and the spilling over of an actual war in Syria into another potential migrant crisis.

We may look back on coronavirus as the moment when the threads that hold the global economy together came unstuck; and startups and growing businesses like mine could end up paying the price.

Just as important as fighting the virus — if not more important — is vaccinating our economies against the incoming pandemic of panic. Human suffering can come in the form of illness and death. But it can also be experienced as not being able to pay the bills or losing your home.

Small businesses in particular are struggling as supply chains dry up, leaving them without products or essential materials. Factory closures in China have led to a record low in the country’s Purchasing Manager’s Index which measures manufacturing output. China is the world’s largest exporter and is responsible for a third of global manufacturing, so China’s problem is everyone’s problem — even in the midst of a trade war between the White House and Beijing.

All this makes it even more worrying that governments continue to see this as a health crisis, not an economic one. It is time the economists took over from the doctors, before the real pandemic spreads.

It is difficult to imagine Italy not entering a recession (the world’s ninth largest economy is now on lockdown). It is also difficult to imagine that failing to affect Europe and its largest trading partner, the United States. And it is impossible to see how any of this will not add up to a global downturn, unless governments step in faster and harder than they did 12 years ago during the last financial crisis.

The stakes are higher this time, because there seems to be a coordinated effort to economically hurt many Western countries, and warn them away from the aggressive trade policies that Trump has so enthusiastically adopted.

Although China bore the brunt of the virus’s economic and human cost, many in Beijing will see a silver lining in the weakening of the US economy, and a distraction from Trump’s trade wars that appeared to be escalating with no end in sight.

Almost perfectly synchronized with the coronavirus, a Russia-Saudi oil war has erupted. In the short-term, both Moscow and Riyadh can afford the 30 per cent overnight drop in the oil price. But America’s shale gas business cannot: The more expensive process of fracking means that much of the US oil sector will simply not exist if oil prices stay at historic lows, leading to shut downs, job losses and perhaps even state-level recessions.

President Trump has pushed through overdue payroll tax cuts and help for hourly workers — measures that will help both employers and employees survive. In the UK, Chancellor Rishi Sunak today unveiled a ‘Coronavirus Budget’. But everyone needs to think bigger if they want to properly deal with how this new factor changes the status quo.

This is about much more than coronavirus, oil prices, or even the global economy. This is about the balance of power between East and West. The epicenter of this has been, for the last 10 years, Syria. After a decade of conflict on the ground, the face-off seems to have now escalated from proxy war to economic conflict.

The emerging superpowers of Russia and China witnessed what many saw as American irrelevance in Syria. And they are now trying to cement their vision of a truly multi-polar world. Rather than allowing US ally Saudi Arabia to lead the oil markets through the OPEC cartel, Russia and China want to reshape global markets — and power balances — to their advantage.

To survive these shifts, the US, UK and others will need to protect the future of their businesses, large and small, and look for opportunities to benefit from the new economic world order, not deny it. Ignoring these changes will be even more damaging than any flu pandemic.


Local stocks plunge to 6,300 level as PH confirms more coronavirus cases

Local stocks plunged Monday as additional novel coronavirus cases spooked investors.

The benchmark Philippine Stock Exchange index or PSEi tumbled by 6.76 percent to 6,312.61 as trading ended, a sharp drop from Friday's 6,770.38 closing rate.

"Coronavirus is the main culprit. The impact is not only to our health but also on the economy. It's really taking a toll on everyone, especially after the report of the local transmission," said Astro Del Castillo, managing director at First Grade Finance.

Trading firm Philstocks also cited "epidemic fears" as the factor behind PSEi's tumble, pointing out that Monday's nosedive was the biggest since October 2008 during the global financial crisis.

Stocks sustained the decline for the second straight day after briefly recovering last week. The PSEi moved in sync with other markets in the region, with the selloff hitting Australia and Japan the hardest. This is the lowest level seen since January 2016.

READ: Bitcoin is soaring as investors panic about coronavirus

All local indices were in the red, with shares in banks and financing firms crashing by 8.56 percent. Those in the services sector followed with a 6.7 percent fall, followed by industrial firms at 6.36 percent.

"Most investors are racing each other towards the exit, that's why there's a selloff. Uncertainty remains, and even health authorities are saying they have yet to really get a full study on this, on the infection and the cure," the stock trader said in an interview.

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Del Castillo added that the downtrend will likely persist, unless the government provides some positive updates.

"I think what will help calm investors would be a more comprehensive government continuity plan for the whole nation... Uncertainty triggers the selloff, will continue to scare the market," he said, noting that the Legislative Executive Development Advisory Council should already be convened to craft strategies.


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