Making its way into the Human world believably in Wuhan, China; Coronavirus – is a part of the family of the viruses that are found in Animals. Although the actual animal source is unknown, there are fingers pointing towards “Bats” which must have infected some animal sold at the wet Wuhan market where dead and live animals are sold. COVID-19 is closely related to Severe Acute Respiratory Syndrome (SARS) which swept around the world in 2002 and 2003 which soon ran it out.
The devil is in the “no symptom” showcase of this virus as the person infected may not show any symptoms. This virus has made countries get into lockdown as the deaths from this virus
have reached around 24,136 to date and around 530,000 people infected. These cases sweep around 80 countries on the globe which makes it a pandemic outbreak. Below is the image of the top five countries where the coronavirus has taken a major hit.
With the advent of such a virus, the first thing on the list that has to be checked is that the people are kept away from each other, so the spread of this virus is contained, and it gets eliminated sooner. With this measure in place, manufacturing hits down the hardest which can be seen from the image below where manufacturing in countries mainly China has taken a big hit because of the virus. With the manufacturing being hit and 30% of the employees in the manufacturing sector lose their job, the purchasing power also comes down and thus the vicious cycle of negative growth starts.
The spending habits of the people due to coronavirus takes a big hit and this, in turn, makes them move towards payday loans or cash advance loans where the credit loan is typically given on lower credit analysis metrics. The cash loans that people seek are invested towards everyday essentials as the Fear of Missing Out effect comes through to people. These types of cash loans usually come with a higher interest rate but due to the loss of job and the need for instant cash, these loans are used as the resort for such people.
A brief look at the global share market amidst the coronavirus situation (Week ending Feb 2020)
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,” Ben May, head of global macro research at Oxford Economics, said in a report this week. This comes from the fact that there was a panic sell-off in stock markets which can be witnessed from the graph below.
From the above chart, it can be noticed that the Shanghai SE Composite index lost a lot of value but the positive of this is seen on the environmental side of it where the pollution level has come down dramatically across the world and specifically, China due to the drop in the level of the manufacturing activities. The image below shows the pollution level before and after the lockdown.
It can be noticed that there has been a drop in the nitrogen oxide due to fewer cars on the road, lower manufacturing levels, and others. The lockdown has a lot of repercussions on bringing down the pollution level. There are people ordering masks and hand sanitizers from the E-Commerce platform which they buy off using the payday or the cash loan which they have received. It is rightly said that we as humans, “Learn the good habits in the bad times and the bad habits in the good times.” Due to the drop in the pollution level, many experts are citing this as the economy in the future where it will be a low carbon economy. Many lessons have been learned from the spread of this virus.
The S&P 500 graph below shows the impact of coronavirus on the economy and although it is not as strong as the Dot Com Bubble, the fear of the virus comes from the unknown of its longevity. Banks and other financial institutions such as mortgage brokers, payday loans/cash advance and others have come to the realization of giving out loans on a very strict credit rating with the change in the coronavirus.
Although the central banks have stepped in with stimulus packages offering lower interest rates, such as the US Federal Reserve slashed the interest rate by 50 basis points. These changes have little implication when it comes to fuelling spending and so there have been various grants given by the government for all the types of businesses which helped the stock market to come back up for a short time but the stock market crashed again when the news of the lockdown came in. These shocks are bad for the economy and will be a bad effect on the same because history is evident in such an instance. After such reforms come Quantitative Easing (QE) which lets the government buy a lot of businesses which directly has a 12% impact on the productivity on the businesses and this again starts the vicious cycle of problems that the economy faces and people tend to move towards borrowing payday loans/Cash advance loans.
The cash advance companies do make their credit analysis stricter but these instant payday loans have to be paid in time and when this fails; the bottom of the economy gets hit hardest.