In light of the current worldwide spread of COVID-19, the global economy and financial markets are experiencing major impacts. The outbreak of the new coronavirus first appeared in December 2019 in the Chinese city of Wuhan. The disease has infected nearly 800,000 people in at least 200 countries and territories worldwide in the time of writing, according to Worldometer.com.
In an attempt to contain the spread of COVID-19, Chinese authorities closed cities, restricted movement of their citizens and halted numerous business operations.
Expectedly, these measures significantly decelerated their economy (world’s second-largest), which inevitably caused a ripple effect across global markets, while the tangible effects of the Chinese scenario happening all around the globe are yet to become clear.
Aside from the horrifying statistics in terms of health and lives taken, the impact of COVID-19 on the global economy is also extremely present. The outbreak has also immediately and directly started to affect almost every industry across global financial markets, with the ever-present and a quite scary idiom “the worst is yet to come” becoming more frequent by the day.
The Impact of COVID-19 on Global Economy Across Industries
Perhaps the biggest hit in the media industry was taken by the local print-based newspapers. Though printed newspapers are the main source of information for many, the financial and logistical challenges have become overwhelming so numerous local papers are shutting down, leaving hundreds of thousands of people without their main source of information, especially among the senior population.
Television and internet-based mediums, on the other hand, are currently thriving. Broadcast television and SVOD viewing are expected to see a 60% increase in ratings according to Nielsen, as people are physically stuck at their homes and are therefore consuming more content than usual.
E-sports, user-generated content and OTT are also experiencing surges in consumption. These niches could also expect long-term growth induced by the current situation. Linear TV could experience a significant (though short-term) come-back with their current focus on programs that mainly cover news and current events, while their content is also expanding onto education, fitness, religion, cooking, etc.
Banks across the globe, especially European banks, are currently under additional pressure. The outbreak of the novel coronavirus has significantly hindered all major economies and markets, due to both supply chain disruption and the repercussions of social-distancing restrictions. This has the potential to further exacerbate these institutions and the entire banking system that is still coping with reverberating issues caused by the 2008 financial crash.
The European banking index, in particular, was still decreased by more than 50% from March 2008 to the beginning of 2020. The selling across global markets that is now taking place further diminished the index and is now down by more than 70% comparing to numbers from March 2008.
As small and medium-sized companies are now being forced to struggle with repaying the debts due to plummeting revenue and with numerous businesses shutting down completely, the decline is expected to worsen these legacy issues, particularly those of bad loans and low-interest rates in banks’ balance sheets.
European countries that were most struck by the COVID-19 outbreak – mainly Italy, Spain, France, and Belgium – are completely locked down, which basically means that any business activity in those markets is brought to a bare minimum.
From the consumer-standpoint, many are expected to struggle with day-to-day spendings, paying their credit cards off, and not to mention making their mortgage payments.
The travel industry is expected to take a hard hit as well. The airlines are almost completely shutting down flights, people are cancelling both holidays and their business trips, while major travel restrictions are also coming from the governments all around the globe – all in an attempt to contain the novel virus.
The Stock Market Rout
Huge shifts are taking place within stock markets as well. Company shares are rapidly being sold and bought, which has already started to alter pension investments and individual savings accounts (ISAs).
For example, the FTSE index, Dow Jones Industrial Average and the Nikkei – all experienced a huge decrease since the outbreak, with Dow and the FTSE seeing their largest one-day plummets in the last 33 years (though, the indexes started to bounce back a little bit during the final week of March).
(Photo Source: BBC)
Naturally, many investors fear that this coronavirus-induced crisis is going to hinder the economic growth to such an extent that no government action will be enough to reverse the decline. However, numerous central banks have, as a response, started cutting interest rates, which should, at least in theory, boost the economy by alleviating borrowing and encouraging spending.
IT and Software Development
It seems that the picture is not too different and less bleak when it comes to software development and IT services companies as this industry will also face struggles to bounce back.
The researchers conducted by GlobalData predicts a decline in the IT economy will see economic strains, especially due to severe government measures now being taken in an attempt to reduce and stop the spread of the virus. The IT service sector is likely to struggle as companies are unable to fulfill contracts and proceed with prospective projects.
“The impact of COVID-19 on the IT services sector will be deep, immediate, and long-lasting. While there is a potential upside in most sectors, there is little optimism for IT services. With the world in lockdown, IT services staff cannot access their clients’ sites. Working remotely will cause significant issues, even for those staff in countries where there is respectable broadband connectivity for millions of home workers,” was stated in the “Tech, Media, & Telecom Trends 2020” report.
E-Commerce, on the other hand, is looking very good as 31% of Italian and 50% of Chinese consumers state they’re now using e-commerce “more frequently” due to major shifts in lifestyle.
The Future of IT Economy After COVID-19
It is predicted that the majority of IT projects that can be postponed will be postponed, at least until the end of 2020. The retail of notebooks, displays, headsets, wireless LANs and VPNs is bouncing back, but it will likely be a short-term bounce, while collaboration clouds are under a lot of pressure after a huge increase due to the current stay-at-home workforce environment.
This is, however, great news for cloud vendors across the globe as this niche is likely to benefit both during and after the COVID-19 crisis.
Why General Growth Could Stagnate
Although it is still early to make informed and data-driven predictions, it is highly likely that the global economy will struggle. According to the Organisation for Economic Cooperation and Development (OECD), we can expect the growth of the world economy to grow at its slowest rate since 2009.
Below is a chart of GDP growth forecast by OECD:
The forecast for the world’s economic growth in 2020 is just 2.4%, which is down from 2.9% in November 2019. OECD’s predictions also state that the growth could drop by 50% and reach only 1.5% in 2020, should the outbreak be intense and long-lasting.
Value of Gold is Plummeting
Risky investments are not common, especially in the time of crisis, and gold is typically considered a safe haven for investors when uncertainty strikes. The impact of COVID-19 on the global economy is altering the price of gold as well. Until March 2020, the price of gold has been going up, while now as investors get more and more careful and tactful regarding the global recession, the price of gold is rapidly declining.
Declining Oil Prices
The ripple effect also diminished the oil price that is currently the lowest it’s been since June 2001, which caused realistic fears among investors around the globe as the spread of the novel virus is likely to further shake the demand for oil.
How Public Cloud Services Can Aid In Recuperation
As the working environment suddenly changed and the majority of people are currently working from home, the demand for cloud-based or cloud-native services ramped up dramatically, which has put this industry to the toughest test yet. Luckily, the public cloud ecosystem managed to rise to the occasion and has proven to be a firm shoulder to rely on for many other industries in the time of crisis.
- High Reliability
- High Scalability
- Better Communication & Functionality Among Teams
- High Cost-effectiveness
- High Time-To-Market Efficiency
- High Accessibility & Support
- High Levels of Security
… and would have all been impossible only a decade ago.
To put these benefits into more tangible context, public cloud helps directly alleviate the current crisis in the following examples:
→ Remote Work
After it was clear that the COVID-19 outbreak is going to be the biggest one in modern history, the vast majority of companies encouraged their employees to work from home. Making sure business continuity is achieved and maintained during the now ubiquitous crisis-management mode that demands the right combination of tools, agility, and patience.
Public cloud solutions offer the right type of technological environment and the tools needed for the new work conditions to actually function in practice. They provide the architecture necessary for businesses (regardless of the size or industry) to make this transition to working remotely as seamless as possible, without any major disruption in their workflows, management (both long-term and day-to-day), remote project collaboration, client management, customer service, etc.
→ Lightspeed Infrastructure Lift
As almost all transport is restricted, brick-and-mortar stores are closed, and with consumers now staying indoors, many businesses are being substantially affected. This also means that the purchasing process is now mostly taking place online, resulting in a huge boost within the e-commerce industry.
Cloud-based environments are those that keep the e-commerce wheel turning, and we expect to see an even bigger increase in consumption within this niche in months and years to come. Cloud allows and enables extremely quick, cost-friendly and scalable lifts of e-commerce infrastructures and other similar digitized services/platforms/initiatives that have now become the main modus operandi for most businesses across the globe.
→ Quick & Easy Infrastructure Scale-down/Scale-up
Another huge benefit of cloud-based environments is the ability to almost immediately scale the cloud architecture both up and down depending on the fluctuations in demand. This kind of scalability – regardless of the industry and/or niche – allows businesses to optimize their costs and mitigate overheads, which is crucial in the time of economic crisis and uncertainty.
Rising to the Occasion
Public cloud giants like AWS, Google Cloud and Microsoft Azure have all been able to stoically withstand the surges in traffic and demand without even a hiccup. “We have taken measures to prepare and we are confident we will be able to meet customer demands for capacity in response to COVID-19,” said the AWS spokesperson, while other small-scale cloud providers have also managed to meet the challenges caused by the impact of COVID-19 on the global economy.
Many businesses and consumers have in recent weeks increased their usage of various front-end applications like Zoom, Slack, Skype and other platforms that are now making sure the economical world continues to turn. However, it is the back-end infrastructure of AWS, Microsoft Azure, and Google Cloud that is making all now-vital software solutions running smoothly.
We expect to see a big rise in demand for all cloud-based and cloud-native services, especially for the Infrastructure-as-a-Service technology that offers the only solid solution for years to come due to its scalable, secure and cost-efficient nature.