Unlike when China reported its first case, the Coronavirus threat has now shaken the global economy and financial markets. The virus has upended the global financial fabric in ways few would have predicted. Big economies like the US, Germany and Japan are all staring at recession and needless to say, the ripple effects of such will be felt globally.
World business leaders have been monitoring the situation and thinking about what a Covid-19 recession may look like. Also, they have been considering how severe its effects may be. However, foreseeing the global financial future amid the quick spread of the virus is challenging.
Experts are now resorting to using histories of past pandemics to predict what the path ahead may look like. Also, this includes watching out market signals and what recovery patterns the world has taken in the past.
According to The New York Times, the last time the financial world experienced such a threat was 12 years ago. However, it was not a virus threat, and therefore the market is experiencing new vulnerabilities.
In the past few months, there has been a growing level of uncertainty. Several countries across the globe are experiencing a sharp increase in equity market volatility. Also, this new virus has led to a fall in stock markets around the world, more especially in the USA, Japan, and the Euro areas.
The increase in uncertainty means there will be tougher financial times ahead. For instance, investors are relocating from areas hit by the virus to safer grounds. Consequently, high end and emerging market bonds denominated in US dollars have widened.
The financial times will become more stringent due to the high funding costs that companies are facing. There is slow economic growth as consumers are becoming more careful because of the current financial uncertainty. Also, companies across the world are postponing their investment decisions, especially in countries hit by the Coronavirus.
According to the Harvard Business Review, there is a chance for financial markets to recover after this crisis. However, it will take some effort from world leaders to bring the situation to normalcy.
Here are things financial leaders can do;
• Financial markets continue to face uncertainty, and therefore, leaders should not rely on projections.
• The effects of this virus will not be uniform in every industry. Therefore, you should not fear that your industry will face similar threats like others. Trust your instincts.
• Focus on looking past the crisis. For instance, what opportunities and challenges exist? What economic legacy will Coronavirus have on macro and microeconomic environments?
• Look into what the post-crisis situation will be for you. What new processes or technologies can you adopt to give your company a competitive advantage?
There is a need to have targeted monetary policies that can help small businesses and homes. According to The International Monetary Fund, Italy has supported families of laid-off workers and extended tax deadlines for companies.
South Korea and China have also waived contributions for small businesses. These coordinated responses will go a long way toward keeping households and businesses financially stable.