Stocks have dropped dramatically. The airline business has become stagnant. Giants like Apple, Nissan
and Nike are facing grim times. Economists predict an economic apocalypse, and people on a global
scale are panicked. Schools, factories and businesses are closing down, and the streets of Wuhan, China
do look like a scene from a post-apocalyptic movie. This week, all major markets have suffered a 10-15%
drop. But, is there any reason to believe we’re facing a global recession?
The first thing we do when we want to bust myths is do a fact cross-checking, against what we know and
what we don’t.
What do we know about Coronavirus?
1. Coronavirus has a mortality rate of 3.4%.
2. Whereas the mortality rate seems to be a small number, 3.4% of the infected population
translates into 4000 deaths as it is.
3. Stock markets have taken a plunge.
4. The global GDP has already been affected
5. The global growth hadn’t looked exactly very sunny to begin with:
6. With the US-China trade war and the UK-EU tensions, it’ll be hard for the world economy to get
back up, seeing how China, the world’s trading epicenter has taken a major hit in its economy,
supply and demand.
What We Don’t Know
1. We don’t know much about the virus at all, or even the actual number of cases- only the
number of reported cases
2. We can’t truly predict whether this virus will have a devastating impact or not, because of the
lack of facilities for detecting the virus. While knowing the number of deaths per number of
infections could increase the mortality rate, it could also decrease the mortality rate.
3. Stock markets are plunging, and businesses are slowing down more due to perceived threats
and risks, as compared to actual risks- that’s because no one would take chances with their
money, which is fair enough.
4. Since investors don’t want to invest, they’re locking their money away in loans to safe
governments. This has pushed down the prices of government bonds and the interest rates that
governments need to pay.
5. Comparing other global contagions in the past isn’t a good basis for comparison, since in the
1980, the financial markets were the same as economic output. Now, the output is four times as
much as it used to be. Disruptions in economies can now send waves through the markets.
6. Besides unemployment, another major issue is lack of human labour