Will Corona change the economic map of the world?
Covid 19, or so it is called, the latest state of worldwide panic, with its rapid spread, it initiated a response from all the world’s countries with almost complete lockdown in all of them, which had many negative effects on the global and local economy for our Arab world.
We will review together some of the negative effects on the global economy and how we can deal with this crisis as traders.
Goldman Sachs expects US gross domestic product to shrink by nearly 34% during the second quarter of this year – with the unemployment rate rising to an unprecedented 15% and thus a more-than-expected recession, the report added. It happened in 2008, what is known as the global financial crisis.
The Wall Street Journal previously reported that the US economy could lose more than $1.5 trillion due to the pandemic.
According to Standard & Poor’s: 2020 is the year of economic stagnation due to Covid-19
According to Morgan Stanley, all US companies will make losses in 2020
IFO Center for Economic Research: Corona may cost the German economy $785 billion dollars alone.
President of the Federation of Industries: Italy’s economic losses from stopping production may reach 100 billion euros per month.
World leaders say 2020 is the worst economically.
President Trump also stated that things will get worse before they get better until next May/June, and another just statement was given that things may improve before that, he also mentioned that he needs to pump nearly $2 trillion dollars to support the American economy despite the presence of a deficit in the American government that reached nearly $1 trillion dollars.
Trump went further, which confirms the depth of the crisis by banning the statement except through the US Vice President personally, which confirms his keenness to direct matters smoothly.
Almost all industries stopped, and the US President extended the ban until the end of this April.
The economic aid package, of which nearly $500 billion has been allocated to help its citizens pay the necessary living expenses, but that, according to experts in the American economy, is sufficient for only one month – the rest of the aid is directed to protect companies from collapse, but this is not enough and is not close to maintaining growth rates.
It is worth noting that the stock market decline is the lowest since the global financial crisis that occurred in 2008, and it is known that the rest of the world follows that decline, and the closer the relationship of countries and their economies to the American economy, the greater the negative impact on them.
One of the effects that cannot be ignored is the sharp drop in oil that exceeded 50% of its value before Covid-19, which increases the difficulty and complexity of the oil trade situation. Is also the double effect of the lack of demand due to the suspension of factories and planes, and to the filling of most oil stores and pipelines, in addition to its increased supply. Because of the difference between OPEC and Russia and the increase in production from Russia and Saudi Arabia, which further complicates the situation until this very moment, so I do not expect from here to the end of the year or to the fourth quarter at best anything except in the range of 20 to 30 dollars.
Unless the wheel of production turns around and the economy starts to recover, we may see prices again in the range of 40 to 50 dollars, according to my estimation.
A UN report states: The epidemic will cause the loss of more than 1.7 million jobs in the Arab world.
After reviewing those statements and what originated in some important reports about the most important economy in the world, as well as two of the most important European countries, we have gone back a little to see what impact it had on the country of origin, China. To begin with, the size of the Chinese national product is approximately 13 trillion dollars, which is approximately 30% of the global national product. China’s currency outside the world system without restrictions, according to the agreement between China and the World Trade Organization (WTO).
As part of China’s attempt to contain the crisis as fast as possible, China pumped the equivalent of twice its gross national product, equivalent to 26 trillion dollars.
China’s totalitarian system makes its decision easier and faster without the need for the approval of several institutions, as we are not discussing that topic for the time being.
China seemed very flexible and quick in dealing with Covid-19, so it built hospitals in just ten days. But can you imagine the ability to build a hospital in ten days, accommodating more than 2,500 people, with its supplies, medical and nursing staff, as it seems China was already equipped for that.
It is worth noting that the city of Wuhan, which is the epicenter of the disease, is the city that contains major international companies such as Apple among others, and China exports through that city more than 75% of its exports to the world.
China has begun to recover quickly and is sending medical aid to different countries worldwide, while America is preoccupied with its health and economic problems.
Some say that what happened is somehow orchestrated to make China appear at the forefront and shake the throne of America, which is loaded with burdens and economic problems due to Covid-19.
However, there is an overlap between the Chinese and American economies to a large extent, and things are not two-dimensional in my estimation. Also, the United States will not let things slip out of its hand and the world’s leadership will shift to China, even if it is forced to escalate the current conflict to its highest form.
Although China has stated that the world after Corona will not be the same as it was before Corona, I believe that giant entities do not collapse because of a single crisis, and that the American economy has linked many of the world’s major economies with it.
The matter is so complicated that it is difficult to give economic advice to invest in a commodity such as oil and buy it at a low price because commodities have no limits to their decline in crises, especially oil.
Or to exchange your dollar savings to Chinese and start looking at markets other than the United States.
Or to put your money in gold as a safe haven and store of value.
But before I conclude do you think that China is really ready to lead the world politically, and that it even genuinely wants to? I will leave you to answer this question.
As for my advice to you as a trader, is as follows:
Trade with the lowest possible size of your contracts and do not look for investment now, but daily trading.
Expect that the rise may be great and the decline may also be sharp, so adjust your stop loss to accommodate these movements.
Do not pay attention to the news, but rather look at the screen and trade what you see
Sincerely,
Tamer Ismail
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