The Coronavirus crisis has brought unseen challenges for the entire global economic system. Clouds of uncertainty have covered the financial markets and banking systems across the world. This outbreak has caused a shock to both supply and demand and slammed many global economies head-on. Worries of the pandemic are most likely to reflect in the global banking systems. The lockdowns worldwide impact on industrial production will further hit the markets. Small businesses and the poor strata of society are among mass casualties of this pandemic. While every hand is reaching out for help, there isn’t much that can be done before the effect of pandemic cools down.Many central banks have already cut lending rates to zero after the Coronavirus outbreak was declared a pandemic by the World Health Organization (WHO). The Philippines became the first country in the world to shut down its financial market and stop trading in all segments after record losses worried financial stability in the country. The move involved various rescue measuresundertaken by the government to revive the virus’s effect on the economy of the country.
Common steps taken by banks in time of COVID-19 crisis
Establishing central task forces.
Suspending large scale meetings.
Opening banks with a reduced number of employees.
Making arrangements for remote working of employees.
Though some banks around the world are taking major steps to revive their balance sheets, nothing can be said as of now about their yearly performance. No one can say if banks will be able to post profit in the year or not. The COVID-19 financial crisis is similar to the 2008 financial crisis where an extended period of recession struck the global economy. The International Monetary Fund chiefhas also said that the world should brace for recession and the statement has only created panic among markets that were already struggling with the impact of Coronavirus.
What is Recession?
Recessionis a period where an eligible candidate is unable to find any suitable work for himself in the open market. Due to the unavailability of credit, companies generally stop or reduce hiring during such times. Pay cuts or forced leaves are also an outcome of such a circumstances when every global economy pays the prices of its connectivity.India got out of the 2008 recession period rather swiftly than most economies of its size because of its informal sector and credit policies. The moves which were once termed as ‘strict measures’ to stop the entry of multinational companies, saved India.The country is expected to cross the financial storm of the Coronavirus outbreak with relatively less impact on its economy than most bigger ones. However, the outbreak will surely make PM Modi’s dream of making India a USD 5 trillion economy a hard path to follow.
Effect on small businesses and lower middle class
Small businesses in developing nations are suffering the most from the pandemic. Due to unavailability of modern methods of selling, many such businesses have been forced to close. People around the world are now much more aware about the outbreak than they were a month ago. Social distancing is being followed extensively yet small businesses that have to interact with consumers closely are now shutting shops. Survival has become the first priority. Lower middle class is a strata that keeps dodging between poor and middle classes. These are the people who have food to eat, clothes to wear, and a roof to cover their heads as long as they are working day and night to cover their needs. Due to recession and closing down of businesses, they are the first casualty of a financial war against Coronavirus.As novel Coronavirus infections reach 1 million cases worldwide pressure on global economies and banking systems is rising rapidly. The outbreak has already claimed lives and livelihood of thousands and if the damage is not stopped anytime soon, then the effect could be even more devastating. While you are at your home, safe, let’s all pledge to help the poor and needy in the best way we can. Let no one sleep with a hungry stomach. Let no animal starve to death. Stay Healthy! Stay Safe! #StayAtHome