The Coronavirus Pandemic: Impact on Global Social & Economic Development

The coronavirus outbreak, which started in China, has had negative impacts on the social and economic development of different nations. Also, the pandemic has caused a lot of damage to the health and financial sector of the world and more so the western countries such as Italy and Germany. The high cases of the coronavirus infections have been recorded in France, Spain, Italy, and Germany, and that is why most countries have come up with strict economic policy measures to be implemented to avoid the deterioration of the economy in the foreseeable future (Bofinger et al.., 2020). However, the policy measures tend to be faced by significant challenges when it comes to the demand and supply shocks, which are known as the backbone of the economy of a particular country. For instance, through dealing with the coronavirus infections, it requires imposing strict economic policy measures, and these terms will influence the supply and demand situations leading to safe investments. This paper will summarize the economic policy measures to be implemented by the Germany government in dealing with the coronavirus pandemic effects on the social and economic perspective.

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Economic Shocks

The covid-19 pandemic is known as the supply shock, which affects the global value chains, whereby most of the factories have low or minimal production because there are not enough inputs to support the process. For instance, the north industries in Italy and China are the primary supplier of raw materials to Germany firms or companies (Bofinger et al.., 2020). Still, these two nations are the worst hit by the coronavirus infection cases of about one hundred thousand, which means that Germany will have to depend on their locally produced inputs to continue trading. However, with a reduction in the input, it seems like in the future, some of the operating companies will be forced to shut down due to lack of supplies that is if the corona crisis continues for an extended period. Also, the loss of employees contributes a lot to the supply shock because there is no much-required labor in the factories that produce the inputs or materials (Bofinger et al.., 2020). Most of the workers are sick, others are in residential child care due to the closure of the schools and pre-school institutions, and others are in quarantine. However, the government has suggested the introduction of variants of tele- and home-based work; but still, this idea does not apply to all the workers, such as in the high proportion of routine manual jobs.

The demand shock for Germany products is also reducing in most Germany trading partners such as China and Italy. Also, some of the capital and consumer goods and tourism products are decreasing at a high rate since there are no consumers for such products rather than the food products, and this is possible because the virus spread in china has diminished. Still, outside china has increased in reality, which means all the transportations are canceled, and movement across borders is strenuous unless it is of some essential commodities. Tourism and social consumption are among the domestic demand shock 1, which have a lot of negative impacts on the demand side since there are strict rules on social use, and this means there are no restaurants visits or any trips to trade or cultural events (Bofinger et al.., 2020). Some of the clubs and cultural institutions have been shut down due to the health policy measures put across by the government. The second domestic demand shave is associated with precautionary savings and uncertainty, for instance, the long quarantine duration can result to stockpiling, and even the hoarding of some commodities and the consumers may not purchase them due to unforeseeable future of the coronavirus pandemic ending hence the people tend to save for tomorrow and dwell on basic needs which are perishable.

Economic Policy Measures

The Germany government, through most consultations and discussions with the economic experts they have decided to make sure that there is efficient functionality of the medical care and healthcare system. For instance, if there is overcrowding in hospitals, overstretched health care professionals, and lack of testing facilities and medical supplies, then there can arise overreaction in the population, which will lead to an increase in the spread of the coronavirus infection (Bofinger et al.., 2020). However, there is a significant conflict when it comes to medical and economic goals; for instance, the closing of the learning institutions aids in stopping the spread of the virus. In contrast, on the other hand, they harm the economy due to high costs since the workers are not working, and others are held up with child care. Also, when the health care facilities reach their capacity limits, this means that the Germany government will have to consider other quarantine measures that are costly and threaten the future of the economy, and that is why a massive investment in health care and medical system has to be implemented.

Liquidity support is viewed as the strategy to overcome the short term impacts of a demand shock on the companies. The liquidity support aims to ensure that the coronavirus pandemic does not much influence the Germany economy through the insolvencies, which bring undesired market concentration in the region. For instance, the current payments such as rents, wages, and interests have to be made regularly to avoid the closedown of most companies in the market (Bofinger et al.., 2020). The Germany government has initiated the package measures policy known as "a protective shield for employee and companies" which urges most organizations to have depreciation allowances and this can be achieved by big multi-national firms which are willing to invest or able to spend despite the coronavirus outbreak. Also, the administrative measures of income and corporation tax are implemented from a budgetary point of view so that the coronavirus crisis does not affect the economic balance for the current financial year. However, the liquidity support cannot achieve its objectives without the involvement of the solvency aid to be able to reimburse some organizations in full or part-time costs to cater for social security benefits, which will make the firms to maintain their employees.

In conclusion, the Germany government has been able to identify the coronavirus economic implications and suggest some economic policy measures that can help in saving the economy from falling. However, the actions are also faced with some challenges that are unavoidable, such as the border closure and export restrictions within the European Union region hence causing supply problems. Therefore, the only way to overcome some of the minor challenges such as those of border closure is to urge most of the European countries to open uplift some trade restrictions and open borders for easy transportation of goods around the region.

Reference

Bofinger et al..., (2020). Economic implications of the corona crisis and economic policy measures DOI: 10,1007/s10273-020-2628-0.