Effects of Corona Virus on Trade, Companies, and Tourism

Effects of Corona Virus on Trade, Companies, and Tourism

Introduction

The coronavirus outbreak has killed off a good kick start of the year. This virus, which its first case was reported in China, has killed over 2,000 people and more than 80,000 people have been infected. This virus travels so fast and has seen these numbers increase very rapidly at a rate of even 60%. China is one of the renowned countries when it comes to businesses, especially with exports. This high air traffic opened doors for the distribution of this virus. Even though most countries have been on lockdown ever since the outbreak of this virus, it has been witnessed that it is still being passed on to other countries.

Now, it is not only China who have this epidemic but most of the Asian countries as well as some of the European countries and some parts of Africa. The numbers of people dying due to this virus keep on rising each day and have greatly affected the global business. This has been witnessed even with the gradual infections even in other countries. Since a lot of countries have restrictions, especially air restrictions, global trade has been dramatically affected. Most countries on lockdown are not able to get goods from outside, no tourism, no outside country investment, nor are there any supply chains. This means that the business world is in a complete disarray China being the most affected country. Its economy has great roots when it comes to global contribution. It contributes at least a 17% share of the worldwide GDP. Trade currently accounts for 34% of their domestic GDP.

Reports have claimed that assuming that the virus stayed in China without distributing itself to other countries, there would be a gradual elimination of this virus. The economy would not be affected as much since there would still be at least a 3% growth in the global economy, whereas China would face a 5.4% GDP decrease. According to the report passed by a team in Frost & Sullivan, about this outbreak, in the worst-case scenarios on this virus and June-July does nothing, there would be a global drop in the growth of the GDP by 2%. Everything concerning trade will be affected; for example, oil prices will go down since there is less demand from China, which is currently the world’s largest importer of oil. Since there is no a lot of air transportation going around, jet fuel demand will also go down. WHO is looking into conducting continued research that will them figure out how they can manoeuvre around this virus so that it does not affect the global economies more than it has already had. It is, therefore, calling for an international action plan in response to this virus.

Research methodology & research questions.

The research about the impact of Coronavirus on trade, companies, and tourism is a long one. Still, to complete this research, it would be best to use the Global Epidemic and Mobility Model (GLEAM). This model uses a metapopulation network proposal brought together by real data. GLEAM tends to divide the world into three subpopulations, mainly for air transport. This usually measures the flux of people by looking at the number of people travelling on them, whether for trade or tourism options. The official aviation guide and the IATA provide information about the air traffic, whereas, for the ground mobility, statistic offices in 30 countries give feedback on this. Every human facing the dangers of the Coronavirus meets the following states; susceptible, latent, infectious, and removed. This research will be used to establish the impact made by the Coronavirus on global trade and tourism. The effect caused by this virus will be more evident if this research is done based on the current damages that have been seen due to this virus.

For this research, the data from the GLEAM will be put together with the world trade data analysis on the state of the economy. This data will provide the necessary information resources for this project. There will be the use of bar graphs and charts that will be used to showcase the difference in performance before and after the Coronavirus. Visually, it will be easier for one to give an explanation of the variables by the use of these graphs. The research will also comprise interviews with different company owners, especially those that rely on importing their goods from China as well as those who have ventured into tourism. This interview will be 30minutes long. It will focus on the following questions; what change have they seen in terms of workflow for their business? What are their current plans to help stabilize the situation? What will be the long term effect they will be exposed to if this problem is not addressed immediately? What are their plans in case something like this happens again? Have they joined hands with other organizations to look for solutions? What are the benefits they tend to achieve through these organizations? The answers from these interviews will help analyze the impact caused by the Coronavirus.

Plan of work

This research project will take three working days before its closure. Before the D-day, the team to conduct these interviews will undergo a training process. This training process will be responsible for ensuring that they are fully aware of what to do and what will happen during the interview and data collection. Prospective companies will be contacted to schedule some time for the interview. Six companies will be interviewed; therefore, only two companies will be interviewed for three days. Also, the data to be used from GLEAM and the world global trade statistics will be used on the analysis day so that all final results are put together before coming up with the required impacts. The interview will be oral. All the research materials are necessary for this research are available.

Advantages of this research

This research will prove beneficial to companies as it will help them come up with the required effective plans for such epidemics in case they occur again. It will also help the world trade organization, to know and plan for how they will uplift the situation to ensure that the global GDP does not go down further than it already is.

Limitations

It might be hard for us to interview some of the CEOs in these companies due to maybe their tight schedule. Also, the data obtained from GLEAM and the world trade statistics keep on changing, and it might, therefore, be very hard to come up with actual figures during the completion of the research. Since data is not released every day, working with the available information will not give an approximate of the exact statistics, meaning that results might be limited to only a specific day or time.

Results

We were able to interview all of the CEOs in these companies. Due to the fore alert, they were able to fix their schedules to incorporate us into the program. The feedback gotten from the interviews conducted was overwhelming. 70% of the companies that underwent the interview claimed that Coronavirus would be bringing their business down in a short period is not corrected. 30% of these companies had been fully prepared and had stocked up their storages will all the goods they provide. They, therefore, explained that it would be hard for them to suffer any shortages by the time this virus is done with. It is still however true that they will lose a lot is this virus is not cleared. From the feedback gotten, it was clear that the workflow in these companies was greatly affected. This is because most traders have stopped trading entirely for fear of contracting this virus. Some companies deal with exportation of goods; they explained that it has been quite difficult for them to export even a small batch of products to other countries. This has been as a result of the closure of many airports globally due to the risk of contracting this disease. Currently, all of these companies explained that they had joined organizations within themselves to try and see how they can fight off this situation. They explained that they are at least trying to reduce the effects and implications brought by this virus. Also, the distribution of the current goods they have in their storage has been reduced to half. This will help keep their stock intact before the virus is treated. The long-term effects they explained is including 1. There will be a closure of business since there will be no goods or services to supply, 2. People will lose their jobs since there will be zero or almost zero work to do, 3. It will be hard to make profits, meaning that the running of these companies will stop, no salaries or wages and later on to the extreme measures a closedown of the company. These companies have explained that if this virus is fought with, they will create standards to ensure that if it hits again, they will not be caught off-guard. Although these measures have not entirely been put in place, they are potential measures to help ease the situation for the future. Through this, they will be ready in case the virus strikes again. They did not expound on the exact measures they are taking but assured to share the information once they were done with the negotiations with other companies. Joining hands with other organizations was one of the ways they have come up with to fight this virus. These organizations are looking forward to creating a merger that will help save all of these companies from collapsing. After the interviews, the CEOs showed their confidence in their negotiations on how they will succeed with these plans.

The data that we got from the GLEAM and the world trade statistics by then showed that there was a reduction a very high negative impact on the global stock markets ever since this virus came about. As of January, the total statistics were zero per cent. By this time the rising percentage was 0.5%, followed by a decrease in the same proportion. By mid-February, the statistics began to drop at a high rate. By the end of March, the prices of these stock markets were at -38%.  The travel industry was also negatively affected by the Asia Pacific being the most affected at -98.1% as of March. The bookings for flights and hotels have been seen to reduce dramatically. This has been followed by Europe, which hs had a -31.9%, the middle east and Africa have a -22.6% while America has the lowest being a -14.5% reduction. At this similar time in 2019, America has a high number of bookings by 37%.  It is likely for these figures to drop even lower after the Trump administration put restrictions on the travel between the European airlines and the US. Most countries have travel restrictions due to this virus. The UK government has advised that people should restrain all travel to China, where the virus originated. Also, Italy being one of the first European countries to contract this virus has been on lockdown. GLEAM also reports that there has been a rapid slowdown of manufacturing operations in the factories. By February 25, the factories operating were minimal, especially in China. This means that the supply and markets of the goods will be on lockdown. There has also been a reduction in the sales of cars. During the first few weeks of February, there was a 92% drop in these sales. The world trade data shows that the world has a massive decline, especially in trade and tourism. The lockdown efforts to secure countries is only making matters worse for these sectors. The virus keeps on spreading, and therefore these sectors need to come up with new ways to fix the situation, hopefully, the global GDP to its levels. Significant shifts in the world economy are to be expected.

Discussion

Since most countries rely on China to get their imports, there has been a severe reduction in the Chinese supply chain. Most manufacturing countries have not been working; this means that a lot of goods might be missing from the markets. Some of the products are the reason for the excellence of companies, primarily in developing countries. For example, the automobile companies are facing a crisis since they cannot access the necessary parts to assemble, for example, a motorbike. This would, therefore, mean that there would be a decrease in these motorbikes. The company will not be making any profits leading to its closure as a worse case scenario.it will also impact their export activities as well as productivity. Some of these industries that have been affected by the Coronavirus are precision instruments industry (0.65%), machinery (0.65%), electrical machinery (0.45%), leather products (0.25%) and wood and furniture products (0.2%). These are some of the many sectors that have been affected due to this outbreak. According to the world, trade reports the most affected areas will be the automotive and chemicals for the European countries, the machine; automotive and precision equipment’s for the united states, machinery and automotive for japan, motor and communication for Korea and communication pieces of equipment for Vietnam. These industries have been dramatically by the rise of this virus. According to UNCTAD, the European Union is the most affected country, followed by the United States, while the lowest being India and Indonesia. These countries are known to be the big fish when it comes top contributing to the GDP. This means that if their trade is profoundly affected by this virus, the GDP I the world will fall at a very high rate. Since the world economy is at a very high risk of recession, what would be the recovery plans for this? Whether the economy will be able to bounce back from this or not, it all depends by some various issues for instance, how far the demand of these items will have gone down, whether the damage created will be structural or not, whether corona is here to stay or will be leaving soon among many other things.

For us to get the recovery path from these effects, it would be best to use a three board scenario that is the V-U-L. This is a potential recovery path that the world can use to bounce back from this negative impact. The V-shape will stand for a real economy shock. This means that there is a sudden fall in output and market performances. Then there is an immediate bounce back to its initial state. For this kind of recovery paths, the annual growth rates can take in this shock. This might seem impossible, but it is possible if keen measures are taken. The U-shaped scenario is abit different from the V-shaped. With this scenario, the initial states are recovered while they are still in shock. It, however, brings about a permanent loss of output. For this to be effective, there will be a need for some proof that Coronavirus will not be much prevalent in the world. Are there some sorts of treatment coming up? If this is proven to be accurate, then the world economy can bounce back with the U shaped recovery path. The L shaped scenario means that you will have to assume a significant change that has been brought about by the COVID-19, for example, a break in the economy’s supply in the world or the labour markets. If this is gotten, then it will be possible to match with this virus on the other side as it slowly recovers. It is, however, essential that there is a background check on where this virus came from and what it will take for it to disappear completely.

Due to this, a lot of companies are now trying to anticipate the various impacts that will be brought about this unexpected occurrence. They are trying to come up with disaster recovery plans for the future as well as currently. While making these disaster recovery plans, it is good to consider the transportation and production of them as well. Hope is now fading, and the world cannot keep on hoping that there will be a sudden recovery from this. Therefore a good disaster recovery plan will need to account for all the needs of the people in the world. These solutions need to have a serious sit down before any conclusions are made.

Recommendations

As mentioned earlier, most countries get their goods from China and are now being affected so much due to this. For such cases, if as a business person, the only source one has for their goods in China, they will need to look for alternative sources for their products. The current situation for china is not favourable for business; there are quarantines, labour cut-offs have reduced the rates of production highly. It is hard for them to reach the average production levels and therefore, some of these business people will not have any goods supply. It is good to mention that due to this low production, there has been an open opportunity for other countries to join the export market. For instance, Mexico, Morocco, India can now export their goods to other countries. Even though not much since they also rely on china partly, at least they can continue with their production. Nations, therefore, need to look for such production sources that their national GDP is not much affected. Also, check on the transport means in which one can use to get their cargo transported. Check on the shipping costs as well. Usually, shipping costs are likely to hike if there are not cargo transport means. One may look forward to making a plan with shipping companies in such times of crisis. By doing this, an agreement will be reached, and the prices will not be too hiked. One can also look for alternative means or routes to get their cargo to the country. This will allow them to circumnavigate the delays from shipping companies due to the Coronavirus. Finally, disaster planning is essential even when there are no signs of any disaster attacks. A good disaster management plan can save the potential loss of outputs. When there is an occurrence of a disaster even though not anticipated, the nation will be able to fight against it, for example, the shipping and product sources. This is something that every government should look upon having. For example, if nations like the European unions had alternative means of where they can get their products in cases of disaster strikes, they would not have been severely affected by the coronavirus outbreak.

Conclusion

While Coronavirus remains to be a disaster unmanaged, there will be a need for the formation of a Brexit in the following years that will help recover the impacts. The consequences of this will, however, be vast in terms of taxes, supply chain strategies and the customs and duty. As time goes by, anticipating the effects of this on production and transportation of goods will help much in ensuring that you are resilient and prepared for any kind of disaster. Coming up with an anticipated approach will go a long way in ensuring that the world does not face a more dangerous situation than this in the future. Investors should also take note of this and follow suit as well to ensure that they allocate their funds to only those areas that are important and beneficial to them. Hopefully, Coronavirus is not here to stay, meaning there will be recovery soon even though it will take time. Anticipation for these dangers could be the only way out in the future.