Detailed Analysis: Global Economy in the Wake of COVID-19 Report

This report provides a comprehensive overview of the global economy, with a specific emphasis on the significant impact of the COVID-19 pandemic. It explores the effects of the pandemic on globalization, international trade, and various business sectors worldwide. The report analyzes the roles, responsibilities, and weaknesses of financial institutions in managing the economic fallout. It also delves into relevant theories of international trade, such as the country similarity theory, product life cycle theory, and comparative advantage theory, along with modern firm-based theories. Furthermore, it examines the impact of COVID-19 on digitalization and the roles of supranational economic governing bodies. The report concludes with a summary of key findings and a discussion of future implications.

Global Economy

Table of Contents
INTRODUCTION...........................................................................................................................3
Effect of COVID on globalisation...............................................................................................3
Outcome of Corona faced by establishments and businesses worldwide....................................4
Roles, responsibilities and weaknesses of financial institutions over the economy....................5
Theories related to international trade.........................................................................................6
Impact of COVID on digitalization.............................................................................................8
Roles of supranational economic governing bodies....................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
The global economy is the economic system which consist of all the humans exist in the
world, it consider all the financial human activity carried forward between national and
international countries and all of their functions like, manufacturing, monetary management,
consumption, trading of commodities and financial transactions. It is refer to the inter relatedness
and dependency of various business activities that take place among different regional, national
or foreign nations. It also help countries in developing the differentiation in products or services
they have in plenty and trade them in order to earn sufficient fund which turns out to be valuable
for t hem as well as the country they exported in. The following report will be a detailed study of
the impact of COVID pandemic and how it reflected upon the international trade, globalisation
and business activities worldwide.
Effect of COVID on globalisation
Globalisation refers to transforming the whole world into a single entity which doesn't
have any cultural, financial or political boarder basically to see a world as a planetary village. It
encourages the import and export of goods, products, workforce, flow of currency, exchange of
information and to develop and exchange technological advancements and knowledge.
Internationalisation have to face many political and legal ups and downs and continuously
working towards coping from all that barriers (Auerbach, Gorodnichenko and Murphy, 2020).
But after the drastic spread of coronavirus it is vastly effected and struggling to cope from all
that loss of human lives, capital and business shutdowns, economic downfall etc.
Global financial situation: UN & UNESCAP have conducted their yearly economical and social
study and they have concluded that the pandemic have reflected some serious impact on the
international economy. The meeting is conducted to done a discussion on various legal and
juridical factors and what all are the measures to be taken into consideration to manage this
repercussion which world have to face due to this disastrous pandemic. They gather together to
work on a collaborative initiation to form specific strategies which can be carried out to balance
out the monetary condition of the world economy.
Developed and developing economic nations are facing problems: The emerging nations and
their businesses are highly dependent on the trade and they tend to outsource the resources. They
have to face a severe challenge and backdrop as government are sealing countries boarders and

following protectionism strategy to avoid the spread of virus. Due to restricting cross boarder
dealings exporting of essential resources is stopped which hinders the functionality of enterprises
as to fulfil one operational activity which needs several resources.
Disturbance in worlds value chain: COVID have destructive consequence on business and
establishments around the world whose profitability and production is totally dependent on the
cross boarder countries and their distribution channel. For example: China is known as the
worlds one of the largest manufacturers and also the hot spot of corona virus because of that
those companies and regions have faced huge loss as they were dependent on the supply chain of
China.
Restriction on travel and tourism: Leisure and tourism industry is mostly effected as
government totally restricted the movement of people from their own town or locality, so its
impossible and illegal for that specific time to move out from their homes to prevent the spread
of corona (Beck, 2018). That results in temporary shut down of hotel and travel industry (Sharif,
Aloui and Yarovaya, 2020).
Outcome of Corona faced by establishments and businesses worldwide
The whole world no matter if the country is small or big they have not spared with the
deadly effect of this virus, many lives have lost world have to face not only financial crisis but
thousands and lakh or people have lost their lives and families, people and their businesses have
faced temporary and permanent shut downs, lots of people have lost their employments.
Underneath the impact on various international business is discussed:
Oil and natural gases: The fuel and gas industry have to face downfall as travelling and
transportation has stopped so the demand of oil and fuel is very low, and people staying at home
decreased the need of natural gases. Many countries have imported their liquid petroleum gas to
other regions because their storage tanks are overloaded due to stoppage in consumption or low
consumption.
Metal industries: The overall need of commercial metals is decreased as all the industrial and
factories functions and manufacturing units have shut down their work.
F&B industry: People are scared to death to consume any packaged or processed food or eating
out is also avoided by people to prevent from themselves from the corona virus (Bickley and et.
al., 2020). So all the restaurants and bakeries and food outlets have faced downswing as people

prefer to eat home cooked food. One side when the demand of organic vegetables and packed
foods like cereals is increase on the other hand demand of sea food , poultry items, meat is
decreased.
Roles, responsibilities and weaknesses of financial institutions over the economy
Financial institutions majorly consists of banks means which do financial activities and
transactions such as investments, deposits and loans. Financial institutions are of many types
which are commercial banks, insurance company, investment companies, brokerage and
investment banks. The main role of financial institutions is to give the liquidity to the economy
and participate in the level of economic activities. In the GDP, investments are influenced by
financial institutions. They tell about the saving and investment of people in the economy which
is very necessary for the economic growth. Without financial institutions interest rates will not
rise and fall and savings will not be there (Zimmermann and et.al., 2020).
These institutions helps the government in the economic growth because they are regulated by
the government only. Current covid situation has also affected financial sector. Economy goes
down because of coronavirus. Financial institutions provide credit facility to the national and
global companies. If someone wants to start new company or want to expand their business
operations than they provide loans to them. Loan facilitates help the business to grow and
achieve success. They also give investment advice, like give advice to their members that where
to invest. Investment is very useful thing because it ensures future. These institutions are aware
about the different investment options. They help in the growth of capital market as these
institutions provide working capital and fixed capital for short term or long term. They plays a
vital role in the foreign exchange market.
They help importers and exporters to receive and raise the funds. They also provide funds to the
customers in different currencies like dollar, pounds etc. They help in the trade development
which include both domestic and foreign trade development. Government ensures that businesses
do not have any problem while doing trade globally. There are weaknesses also of financial
institutions which can be improved. Expansion is limited by these institutions and are only using
present business model. Globally if business want to expand than expand of financial institutions
are much-needed. Financial products which are offered by the company have gap in that. The
profitable ratio of financial institutions are low then the industry average.

Theories related to international trade
International trade refers to the trading and exchanging of goods and services between the
people and corporations belongs to foreign nations. Different concepts of internationalist
commerce and the components which impact the trade are discussed below:
Modern firm based theories
Country similarity theory: This concept is basically refers to the intraindustry commercialism.
In this it is explained that different customers of nations but are at common evolution phase will
likely to have equal preferences (Niewiadomski, 2020). According to this theory it is described
that every country initially proceeds the production or manufacturing for their own domestic
utilisation. Further when the enterprises begun to develop goods and start trading on global
platform mostly in the regions which have similarity with their market turns out to be more
profitable and provide them with more potential growth opportunities. The country sameness
theory states that conducting with those nations which have common economic level and
industrial structure and whose per capita financial gain is somewhat equal and the buying
behaviour of consumers and selection of products and brands are balanced so it is advised to do
commerce with them on priority basis.
Product life cycle theory: This concept is created in the marketing line of work. It is identified
that the commodity existence cycle is categorised into three levels i.e. new, developed and
standardised product. According to this theory it is examined that the generation or birth of
commodity is begun in the parent country, further when it started to be rotated in the market of
various regions it has become modified and moulded into varieties and characteristics according
to people and market demands and needs and at one point it become stagnant. This theory failed
in regards with providing a detailed understanding of the recent business structure in which the
modification and innovation process is in continuation (Ozili and Arun, 2020).
Comparative advantage theory: This is the explanation of specific situation like when a country
have advancement in any product and services like they have plenty of resources and raw
materials which can be utilised for domestic purpose and still have plenty of commodities left to
trade, and on the other hand there are nations which lack in resources and doesn't have any
specialised thing to trade in (Finck, 2018). To balanced out this challenging situation economists
have presented this theory. Competent advantage condition arises when a particular nation excel

in manufacturing one product and the other country can't but have benefit in several other fields
or line of work or they are efficient in producing some other services. This differentiation
contradiction emphasised on relational productivity.
Global strategic rivalry theory:
This theory is made in 1980 and is based on the economists work. This theory focus on
multinational company and how they can take competitive advantage with other global firms.
Global competition can be seen a lot so in order to grow, proper development of competitive
advantage is must. If the company adopt sustainable competitive advantage then this can bring
barrier to the new entry. Barrier to entry means that the hurdles that the new industry may face
while entering into new market. Barriers of entry that the existing corporations can give are:
Research and development: Existing business have resources and proper team for research and
development which tell to the company that what are the demands in the international markets.
These teams come with timely innovation which help the company to sustain for the long time in
the market. They help the companies to reach the organization towards its objectives and goals.
Unique business methods: They have business process or models which help the existing
business to carry their operations smoothly. Apart from this they are having experience of the
industry (Shrestha and et.al., 2020). Experience help the company to survive, and they also know
that how they can restrict the entry of new firms. They have such processes which help to save
the time and increase the productivity.
Control over resources and raw materials: Company have full control over raw materials and
suppliers. They are dealing with the supplier from the long time and taking bulk raw materials
from them. So supplier also listen to them which give them advantage and increase more
problems of new company. They have proper resources for every process starting from
production to the distribution. Proper distribution channels help them to capture whole market.
Porter’s National Competitive Advantage Theory:
Michael Porter has developed this theory which explain the national competitive advantage.
Porter theory state that national competitiveness of an industry depends upon capability of the
industry to upgrade and innovate. In this theory it has four quadrants which explain this theory,
which are-
Local market capabilities and resources: It includes resources of the nation which can be
natural resources and human resources (Carlsson-Szlezak, Reeves and Swartz, 2020). Nation's

resources are very important for the business and it will tell that what kind of product that
country will import or export. Porter added new list which has advance factor to the list of basic
factor which are investing in the education, technology, skilled worker, infrastructure etc.
Local market demand conditions: Porter believes that local market should insure innovation
which will give sustainable competitive advantage. Local markets should be sophisticated,
innovative, trendsetting and develop new technologies and products. Innovation is very
important for the survival of the company in the long run. Customers get attracted towards the
innovative products which will increase the revenue and the customer base of the company.
Complementary industries and local suppliers: To remain in the competition global firms get
benefit from strong, efficient and effective supplier whose supply required inputs to the industry.
Local industries also help each other because if they have strong bond within them then they
together can restrict global company.
Local firm characteristics: Characteristics of local firm include industry structure, industry
rivalry and firm strategy (Ozili and Arun, 2020). The strategies of the local firm can affect the
competitiveness of a firm. If the rivalry is healthy between all the local firms will bring
competitiveness and innovation. Local firm should not cut each other rather they should help
each other. If they will do bad competition than the advantage will take by the global companies.
Such strategies should be adopted by local firms which will help them in smooth running the
business.
Impact of COVID on digitalization
Due to COVID a boom in the digitalization can be seen. Everyone is using digital
platform for everything from doing meeting online to studying online. Internet has increased the
innovative capacity of the industry, costs are reduced and help in doing global trade. Digital
transformation can be seen in business models, channels etc. Payments and banking are
influenced by digitalization, using digital platforms for this is not new but COVID had rapidly
increased the use of digital technologies.
There is a drop in the global demand due to COVID. Government are now busy promoting their
local companies and reduce imports. They started campaigns which support local employment.
Government has also launched many digital platforms to facilitate the payments. Mobile
penetration and growth of the internet and low cost data plans are also available and the shopping

behaviour of people had also changed from offline shopping to online shopping channels are also
pressuring to adopt the digital technologies. Everyone is now doing digital payments whether
buying grocery online or buying vegetables or fruits or medicines (Canuto, 2020). OTT
platforms also flourished. The impact of pandemic has grown the OTT platform now videos are
releasing on these platforms as due to COVID theatres got closed, which help OTT platforms to
make good profit.
Digital banking sector also got emerged in pandemic. Most of the people are using banking apps
or doing online payments which is fast safe and saves time. If done properly then it can control
fraud activity. Digital platforms are helping people in doing the business without going outside.
From their home only now they can do business and generate good revenue. Digitalization
maintains the productivity with safety and economic sustainability also. Company should revise
their digital strategy so that in this pandemic also their revenue will not hurt. They should higher
digital expert people who help them in making good digital strategy.
Digitalization and innovation have the huge potential through which society can get help. They
also contribute into health and environment. Pandemic has brought digital transformation which
will empower people so that they can work in new ways. Organization has come up with online
collaboration tools for both partners and employees so that they can work safely and maintaining
proper distance.
Roles of supranational economic governing bodies
It is a multinational federal association in which various countries came together to
discuss and resolve some internal issues and decisions, this actions are dependent on their
members and team associates. SEG are basically a component part of government
administration-al activities, their roles are discussed below:
Promote peace: Restriction of various banking, defence administrative district owned
establishments from entering western markets. Creation of negotiation assembly, to prevent
fights and conflicts in cross countries.
Aid to humanity: Started initiative to end poverty and help the underprivileged, by providing
employment and education opportunities to cope up with current situation.

Economically upliftment: Provide loans to enterprises to develop strong infrastructure. Create
financial condition creative activity to lift population upwards, help the resolution of barriers and
encourage by providing necessary tools for national and international trade.
Political and economic stability: Provide beneficial help to local and domestic industries by
lending loans on affordable interest rates. Maintain good relations with their neighbour countries
and form a alliance with them to provide information in advance if any political or legal changes
are going to occur in future so it will be beneficial to prepare and form strategies in advance
(Seric and Winkler, 2020).
It also make sure that all the member nations should actively take part in all the political decision
makings and meetings to to maintain good relations and corporation.
CONCLUSION
From this report it can be concluded that corona put the great impact on globalization and
affected the business across the globe. Businesses are affected a lot by this pandemic. Many
businesses have to face huge loss. Roles, responsibilities and weaknesses of financial institutions
in an economy are discussed. Theories and model of international trade are also evaluated which
are country similarity, product life cycle, global strategic rivalry and porter's national competitive
advantage. Understanding supranational economic bodies. Impact of pandemic on digitalization
are explained in detail. COVID help digitalization to grow more. People now are more using
digital platforms. Baking sector and other industries now had understood the importance of
digitalization and are making strategies related to digitalization because they know that now if
they want to survive in the market then to adopt digitalization is must.

REFERENCES
Books and journals
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global economy. Harvard Business Review.3.
Finck, M., 2018. Digital co-regulation: designing a supranational legal framework for the
platform economy. European law review.
Niewiadomski, P., 2020. COVID-19: from temporary de-globalisation to a re-discovery of
tourism?. Tourism Geographies, pp.1-6.
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Global Economy: Demand and Supply Shock.
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some extent. VoxEU. Org. 28.
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Shrestha, N. and et.al., 2020. The impact of COVID-19 on globalization. One Health. p.100180.
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