Economic impact of covid-19: The other side of the coin.
As majority of the people often think about one side of the coin, so the other side eludes them. The world has been encountering the severe effect of Covid-19 since the last phase of 2019. Everything has been halted and most importantly the global economy has gone downturn. There, amid the situation, may be a recession coming; one side of the coin what we are thinking right now, but there is, as I mentioned earlier, always the other side of the coin which I would call “Economic Mismatch”— my main concern of that article. Let’s examine the nuances between upcoming recession and Economic Mismatch.
A recession is a situation where inflation-adjusted per capita GDP declines and downturn of the economy is backed up by the impuissance in industrial production, trade, capital flows, oil consumption and unemployment; where all of these macroeconomic indicators are influenced by economic shocks.
The economic shocks may happen by the effect of Covid-19. On account of Covid-19, people are quarantined in their house and keep up “social distancing”. Social distancing —the aftermath of Covid-19— affects economic activities, the activities which involve physical interactions among people, such as tourism, retail trade, restaurants, office work etc. As an evidence WTO said, “The dollar value of world merchandise exports fell by 3% to $18.89 trillion”. Also, there is a presage that the aggregate supply will precipitate; as the global supply chain is severely affected and consumption, backed by income, will fall, hence there will be a drop-off in aggregate demand(AD), which further escalates unemployment. In a nutshell, the economy will be foundered into a great chaos.
But what’s happening on the other side of the coin? I have mentioned earlier, economic activities, which involves physical interactions, are affected and those, which don't require physical interactions, are unaffected. That is why the business of Netflix, Amazon, which doesn’t require physical involvements, is booming and that of restaurants, hotels, retailers and tourism is slumping. Consequently, the aforementioned problem causes “Economic mismatch”; an Economic mismatch takes place when one side of the economy is booming and the other is slumping. Here, the problem induced by Covid-19 is not a general drop in Aggregate demand, rather It is a problem of Economic mismatch.
