Vietnam National University - COVID-19's Impact on Global Economics

This group assignment from Vietnam National University's International Economics course analyzes the multifaceted impact of the COVID-19 pandemic on the global economy. The report examines the virus's origin, societal effects (including education and working conditions), and economic consequences, such as direct impacts on production, supply chain disruptions, and financial market instability. It delves into the effects on GDP and FDI, providing insights into the economic situations of Japan, China, the US, and Europe. The study further explores global trade effects, including exporting and importing, trade costs, trade in services, and the rise of e-commerce. It concludes by forecasting economic recovery timelines, the role of vaccines, and strategies for global economic recovery, including individual lessons learned by group members. The report highlights the interconnectedness of global economies and the profound, lasting effects of the pandemic.

VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITY
INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS
Group Assignment - International Economics
Lecturer: Cao Minh Man
GROUP MEMBERS
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NGUYỄN VŨ NGỌC THỦY BABAWE18668
TRẦN HUỲNH TRÚC NGÂN BABANS17065
ĐỖ NGUYỄN MINH ANH BABAWE17448
NGUYỄN VĂN ĐĂNG KHOA BABAWE19062
NGUYỄN CÔNG DANH BABAWE16370
BÙI THỊ HOÀNG GIANG BABAWE19040
TABLE OF CONTENT
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THE COVID-19 BACKGROUND...…………………………………………………………….……………………... 4
Coronavirus origin 4
Impact on the society 4
Impact on the economy 5
GLOBAL ECONOMY EFFECTS OF THE COVID-19 ..…………………………...…...……………… 7
The GDP 7
The FDI 8
The GDP and FDI of VietNam 9
GLOBAL TRADE EFFECTS OF THE COVID-19 ………………………………………….……..……….9
Exporting and importing countries 10
Trade cost in the time of global pandemic 12
Trade in services in the context of COVID-19 14
E-commerce, trade and the COVID-19 pandemic
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THE GLOBAL ECONOMY RECOVERY ....……..…………………………………………..…….…………..17
Forecast the recovery time 17
Vaccine Covid-19 17
How to recover the economy 18
Global economy 18
International trade 19
INDIVIDUAL LESSON LEARN………………………………………………….…………..………………………... 21
THE COVID-19 BACKGROUND
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CORONAVIRUS ORIGIN
Coronavirus is in charge of the current outbreak of pneumonia that began at the beginning of
December 2019 near Wuhan City, Hubei Province, China. The disease has since spread to
almost all countries all over the world. COVID-19 can be severe and has caused millions of
deaths around the world as well as lasting health problems in some who have survived the
illness. Until now, following statistics of WHO, there are 3,720,000,000 people dying due to
Covid-19 in the world, and the United States now is the most country in the number of
victims and deaths in the world.
IMPACT ON THE SOCIETY
1. Impact on the society
From human existence, these social connections, interactions and relations have become
indispensable in our life. So, if there is an absence of such connections, it definitely leads to
stressful states of loneliness, anxiety, depression, mental disorders, health hazards, and many
other issues which impact the life of the individual and the collective society as a whole.
Early evidence indicates that the health impacts of the virus are being borne
disproportionately by poor people.
For example, homeless people, because they may be unable to safely shelter in place, are
highly exposed to the danger of the virus. People without access to running water, food,
refugees, migrants, or displaced persons also stand to suffer disproportionately both from the
pandemic and its aftermath – whether due to limited movement, fewer employment
opportunities, increased xenophobia. Moreover, quarantine can expose individuals to
stressors both during and after the quarantine period and may result in adverse acute and
long-term psychological outcomes. Effects of quarantine can include symptoms of
posttraumatic stress, anxiety, and depression, and responses such as fear, anger/irritability,
insomnia, fatigue, detachment and avoidance behaviors, impaired concentration, and
diminished work performance.
2. Impact on the education
There are a lot of student’s fears, such as not being able to graduate in time, an impossibility
in taking the certificates, or the virus preventing them from finishing their exams, have
reduced drastically. Due to COVID, 13% of students delayed graduation, 40% lost a job,
internship, or offer, and 29% expect to earn less at 35. Online learning via studying-online
apps, such as Zoom, MS Teams, Google Meet, are applied in education for students at all
levels.
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Due to the situation in Covid-19, both teachers and students are suffering from difficities,
such as Internet disruption, error sound and microphone devices, misunderstanding between
teachers and students,...Especially, teachers are facing the most pressures about online-
teaching methods and organizing examination methods. In the educational field, availability
of digital infrastructure with proper internet availability and access to gadgets must be
ensured to avoid any disruption to the study process.
3. Impact on the working
The Coronavirus (COVID-19) pandemic has led to millions of global employees to work
from home – an unprecedented and ongoing phenomenon “facilitated by the rise of
connectivity and communication technologies”. Virtual teams were already growing in
number and importance pre-COVID-19, as noted in the paper. Now, many workers
participate in a variety of remote teams, via synchronous and asynchronous digital
communication. Since virtual teams are here to stay for many workers even post-pandemic,
it’s important to recognize the challenges and adopt best practices. Moreover, the people
working from home require awareness and knowledge of hackers.
In fact, the fastest growing type of cybercrime, a lot of big companies are now playing on
fears about leaking private information. Because home-working becomes the new normal,
criminals are taking advantage of vulnerable people and workplace disruption to steal
information and get money. Furthermore, because many small businesses are financially
fragile, mass layoffs and closures had already occurred. So, the majority of businesses
planned to seek funding through the Coronavirus Aid, Relief, and Economic Security
(CARES) Act. However, many anticipated problems with accessing the program, such as
bureaucratic hassles and difficulties establishing eligibility.
IMPACT ON THE ECONOMY
The outbreak of pandemic COVID-19 across the world has completely disrupted the political,
social, economic, religious, and financial structures of the world. More than 80 countries
have closed their borders from transitioning countries, ordered businesses to close, instructed
their populations to self-quarantine, and closed schools to an estimated 1.5 billion children.
The world’s top ten economies such as the United States, China, Japan, Germany, United
Kingdom, France, India, Italy, Brazil, and Canada stand on the verge of complete collapse.
In addition, stock markets around the world have been pounded, and tax revenue sources
have fallen off a cliff. The epidemic due to infection is having a noticeable impact on global
economic development. It is estimated that by now the virus could exceed global economic
growth by more than 2.0% per month if the current situation persists. Global trade may also
fall from 13 to 32% depending on the depth and extent of the global economic slowdown.
The three important Economic impact of COVID-19 could affect the global economy
through:
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1. Direct impact on production
Production has already been substantially affected by the shutdown in global areas. Some
other countries are also beginning to feel a direct impact as their authorities put in place
similar measures. The slowdown or lockdown in many countries has effects on exporters to
other countries. According to the World Bank, even without new outbreaks of the disease,
these areas will likely experience slow growth in the first half of 2020.
Over the last two decades the People’s Republic of China has become the world’s largest
exporter and an integral part of global production networks. China has established itself as a
key provider of inputs and components for many products, such as automobiles, cellphones,
medical equipment, and more. As a direct consequence of the spread of coronavirus, China
has seen a dramatic reduction in its manufacturing Purchasing Managers Index (PMI) to 37.5,
its lowest reading since 2004. This drop implies a 2% reduction in output on an annual basis,
which has ripple effects through the global economy and thus far has caused an estimated
drop of about $50 billion across countries. The most affected sectors include precision
instruments, machinery, automotive and communication equipment.
2. Supply chain and market disruption: Many manufacturing firms rely on imported
intermediate inputs from China and other countries affected by the disease. Many companies
also rely on sales in China to meet financial goals. The slowdown in economic activity—and
transportation restrictions—in affected countries will likely have an impact on the production
and profitability of specific global companies, particularly in manufacturing and in raw
materials used in manufacturing.
3. Financial impact on firms and financial markets: Temporary disruptions of
inputs and/or production might stress some firms, particularly those with inadequate liquidity.
Traders in financial markets may or may not correctly anticipate or understand which firms
might be vulnerable. The resulting rise in risk might reveal that one or more key financial
market players have taken investment positions that are unprofitable under current conditions,
further weakening trust in financial instruments and markets. A possible event would be a
significant financial market disruption as participants become concerned about counterparty
risk.
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GLOBAL ECONOMY EFFECTS OF COVID-19
The growth rate will be estimated to increase 6,4%, early in the year the prediction was 5,5%
and the statistics nearly doubled compared to the forecast in October 2020. The analyst
claims that the strong recovery of the world’s two leading economies had a positive impact
on global growth. After 4 months of vaccination, more than 50% of the population had been
vaccinated at least one, bringing the US economy back to the new normal situation.
The world has recorded tons of economies in the world falling into recession concurrently
such as the US, Europe, Japan, India, et cetera. Asia countries continue to be the top areas of
new COVID-19 infections such as Japan, India, Taiwan, Indonesia. Those countries had
tightened quarantine measures to prevent the spread of the virus. The following paragraphs
will outline the main situation in the selected countries: Japan, China, the US, and Europe.
1. The GDP
First, let’s begin with the Japanese economy. In the third quarter of 2020, the economy has
recovered after suffering from a steady decrease. The growth rate also increased 21,4%
compared to last year, sturdily recovered after drastically declined. This is also the first
quarter of the year the economy has risen and continues to boost in the fourth quarter but with
a lower speed. According to the analysis of the Bank of Japan, business conditions have
improved but remain on a negative scale, combined with machinery order forms that have
shown the slow recovery of capital. Consumers’ trust is increasing and the unemployed rate
is remaining at 3,0%. After 14 months of dropping constantly, the export growth rate will
recover in 10/2020. Some analysts worried that the growth impetus of Japan will be lost
while the spread of COVID on a large scale may return inside and outside the countries will
put pressure on demand. Financial analysts predict that Japan’s economy will decline if the
US’s economy evolves badly, thereby strongly affecting China – its exports market.
Nonetheless, the Japanese government announced that the import and export are recovering
steadily in the first quarter of 2021. Since 8/2018, this is the first time the Japanese Cabinet
Office has estimated the index of finance as the most optimistic on a 5-point scale. Despite
lowering Japan’s growth forecast from 2.7% to 2.6%, the index of the next 2 years is 0.2%
higher than the previous forecast. According to the government data, Japan’s gross domestic
product has decreased 5.1% in the first quarter of 2021 compared to the data of previous year.
Next, China’s economy continued to recover in the third quarter of 2020, with an increase of
4,9% compared to the same period last year’s same period. In the first 10 months of 2020, the
industry’s real value was rising by 1.8%, reaching 6.9% in October while retail sales dropped
by 7.6%. Importing goods decreased by 2.3% in the first ten months of 2020 but there is an
increase of 0.5% in the last 6 months of 2020. Global policymakers hope the strong recovery
of China will restart the demand of consumers as other major economies are struggling with
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prolonged lockdowns and a wave of new COVID-19 infections. The ADB stated that China’s
economy had risen 2.1%, put side by side with its updated date in September of 2020.
Currently, China’s economy is recovering miraculously. Aside from the fast improvement in
the vaccination movements, 40% of the population are vaccinated at least one time. Many
programs to boost the economy have resulted in the escaping of the crisis and led to the
spectacular growth rate in the first quarter of 2021. The country’s gross domestic product in
2020 has reached 2.3% according to the data released from National Bureau of Statistic of
China.
During the first quarantine, the GDP of the United Kingdom was 25% lower within 2
months of February 2. The economic activities were during the spring and summer and
reflected the demand for Economy and Pent of the first Rock. Following this, even more,
short-term rock in November, there was another monthly autumn of GDP. The restrictions
were alleviated in December in a short time. Since the new variant of the virus promotes the
COVID-19 infection rate, it has introduced a carefully selected blockage in the United
Kingdom at the beginning of January 2021. This contributed to another GDP fall. However,
economists have a decrease in economic activity registered at the end of 2020 in early 2021,
with a decrease in economic activity registered at the beginning of 2021. In early 2021, it was
6% lower than in March 2021, which was before the level pandemic of GDP. However,
assuming it is a virus rescue, it is still uncertain how strong and maintained it is for recovery.
It is a much stronger consumer spending, which is more likely to be as strong as after the first
period of lockdown.
Germany’s gross domestic product (GDP) contraction between January and March this
year was slightly higher than expected, and it contracted 1.8% compared to the last quarter of
2020. The economic sector most affected is private consumption and household consumption.
Spending on goods and services decreased by 5.4%. On the positive side, construction
investment increased by 1.1%. International trade also recovered at the beginning of the year.
Imports of goods and services increased by 3.8%, while exports only increased by 1.8%.
However, compared with the same period in 2020, Germany's GDP has fallen by 3.4%.
Compared to the fourth quarter of 2019, the economy fell by 5% before the coronavirus crisis
began. Due to restrictive measures aimed at slowing the spread of COVID-19, German
companies remained largely closed despite strict closures in the first few months of this year.
As the number of new cases has begun to decline, certain areas of Germany have begun to
reopen in recent weeks.
When the United States began shutting down in March last year to stop the spread of Covid-
19, people simply stopped going anywhere before Zoom's phones or restaurants closed or
Netflix's never-ending spree. In the coming months, the unemployment rate will go from
4.4% in March to 14.7% in April. It will not fall below 10% again until August. The gross
domestic product of the United States in the first quarter will fall by 4.8%, which is the
largest contraction since the financial crisis of 2008. In the next quarter, it will fall by 31.4%
and then increase by 33.1% in the third trimester. Now all this is an afterthought. However, as
President Joe Biden and Congress passed a $1.9 trillion Covid aid bill nearly a year later, it is
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instructive to review and remember how sudden and severe the blow to the country’s
economy was.
2. The FDI
About the Foreign Direct Investment, FDI flows to developing economies fell by 12% to
approximately $ 616 billion, they accounted for 72% of global FDI, the highest share on
record. The decline in developing regions is very uneven: Latin America and the Caribbean -
37%, Africa -18%, and Asian developing countries -4%. FDI flows to transition economies
fell by 77% to the US $ 13 billion Although developing countries in Asia as a whole
weathered the storm well and attracted approximately US $ 476 billion in foreign investment
direct in 2020, due to inputs from member countries of the Association of Southeast Asian
Nations (ASEAN) The host country provides investment.
In terms of individual countries, China is the largest recipient of foreign direct investment in
the world, and the inflow of funds to this Asian giant has increased by 4% to US $ 163
billion. In 2020, the high-tech industry will grow by 11% and cross-border mergers and
acquisitions will grow by 54%, mainly in the ICT and pharmaceutical industries. "The return
to positive GDP growth (+ 2.3%) and the government's targeted investment facilitation
program helped stabilize investment after the initial shutdown," the report said. India is
another major emerging economy that has also achieved positive growth (13%) driven by
investment in the digital sector.
3. Vietnam
The data released from ADO claims that Vietnam's economy still gains positive numbers
regardless of the COVID-19. Accordingly, the anti-epidemic measures and social-economic
development of the government had a huge impact on protecting the economy from the
pandemic in the previous year, with the GDP growing 2.9%. According to the United Nation
Conference on Trade and Development, due to the negative influence of the pandemic, global
foreign investment inflow (FDI) is estimated to decrease from 30% to 40% in the period
2020-2021. All fields are affected, but FDI declined sharply and clearly in the service aspect
such as aviation, restaurants, manufacturing industries and energy fields. The narrowing of
FDI seriously affects developing countries. If the global FDI is reduced in the long term
period, the consequences of developing countries will be severe because these countries have
portfolios of diverse FDI and the potential profit of this flow is huge. FDI not only increases
export revenue in developing countries, but also creates more jobs, influencing positively to
infrastructure development, transferring technology, especially in manufacturing aspects.
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GLOBAL TRADE EFFECTS OF COVID-19
IMPORTING AND EXPORTING COUNTRIES
1. Exporting countries
COVID-19's spread resulted in social isolation and lockdown measures. These restrictions
limit people's ability to move around their workplaces. Some workers are forced to miss work
due to school closures in order to care for their children. Death and long-term sickness have a
direct impact on the workforce. These adjustments decrease the supply of commodities and
make them less price elastic, causing the country's supply curve to move higher and steepen.
Damage to COVID-19 and consequent shutdown orders affect transportation sectors in
exporting nations, increasing the cost of exporting by increasing port and terminal handling
fees. In conclusion, it is logical that COVID-19 damage reduces the scale of manufacturing in
an exporting nation, hence limiting the country's export supply. In terms of the severity of
supply shocks, there will be industry heterogeneity. Supply shocks will be lower in
businesses that provide vital items, such as food and medical items, than in businesses that
provide non-essential items, such as vehicles and machinery, for example. This is due to the
fact that nations are attempting to protect the supply of critical goods, and lockdown orders
such as plant closures are seldom imposed on the makers of these goods.
However, owing to the emergence of remote work/operation, the negative impact may
diminish with time. In the industrial sector, the advancement of tele-communication and
information technology will allow remote work/operations and lessen supply shocks. Many
countries have attempted to keep their economies afloat by implementing telecommuting
programs. These systems aid in reducing the negative impacts of COVID-19 on commerce.
In addition, such systems may boost production or efficiency. In this case, exports increase.
There will also be differences in how remote work/operations replace on-site manufacturing
activities across industries. Despite the advancement of technology, exports in certain areas
where remote work/operation is less viable are anticipated to continue to decline. For
example, such operations are difficult to conduct in labor-intensive industries such as textile,
footwear, and leather products. Even in capital-intensive industries like machinery and
transportation equipment, if remote work/operation is less practical and in-person presence is
increasingly necessary in the manufacturing process, the output scale reduces significantly.
2. Importing countries
The trade effect of COVID-19 damages for an importing nation will mostly be due to a fall in
aggregate demand in that nation, which will be followed by a rise in port and terminal
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handling expenses. A citywide/national lockdown decreases people's incomes from
employment, which causes a decline in aggregate demand unless the government offers
enough subsidies to compensate for the lost wages.
Even if people's earnings remain stable, their fear of illness reduces their trips to stores and
supermarkets, resulting in lower demand.
In terms of supply shocks, the magnitude of negative demand shocks will vary per industry.
Negative demand shocks may affect expenditure on durable goods more than non-durable
goods, according to research on the trade effect of the global recession from 2008 to 2009.
The reason for this is that previous items had the ability to postpone. As a result, the negative
demand shock in industries that produce durable items may be greater. Plastics and rubber,
leather products, wood goods, textiles, footwear, plastic/glass goods, precious/base metals,
machinery, and transportation equipment are examples of these industries.
Uncertainty about the future or a panic buy, on the other hand, may stimulate demand for
necessary things like vegetables and food. Furthermore, owing to the increased need to avoid
infection by COVID-19, import demand for sanitation items such as face masks and hand
sanitizer may grow. As a result, unfavorable demand shocks for vegetable, food, and
chemical items will be reduced, or even positive. Because textile face masks or protective
clothing for surgical/medical use are classified as textile items, negative shocks may be lower
in that business, despite the textile goods' durability.
Supplier shocks also have a significant impact, resulting in COVID-19 demand shocks in
importing nations via their supply networks. COVID-19 damages reduce downstream product
production, which in turn reduces import demands for upstream items utilized in downstream
goods. We anticipate seeing supply chain impacts in industries with well-developed
worldwide production networks, such as machinery and transportation equipment. These
supply-induced declines in demand are included in demand shocks. Online purchasing is
important for reducing the negative impacts on demand caused by reduced mobility for
visiting retail stores. In items that customers may acquire via the e-commerce industry, the
detrimental impact of COVID-19 on trade will be reduced.
Furthermore, even if COVID-19 infections/deaths decline or cease, and lockdown restrictions
are eased, the rapid transition from offline to online buying is projected to continue, at least to
some degree. Consumers need to make upfront investments to switch to online purchasing.
These investments include the cost of purchasing personal computers or smartphones, the
costs of connecting to the Internet, purchasing software, and the cost of learning how to use
e-commerce platforms. People are hesitant to return to their previous position after making
these investments, therefore this new purchasing pattern will persist. In other words, the
negative impacts on imports of items that are difficult to acquire online are likely to endure.
In addition, the fast growth of online shopping and teleworking is increasing import demand
for IT-related gear, such as PC, smartphones, microphones, and cameras.
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TRADE COST IN THE TIME OF GLOBAL PANDEMIC
1. Transport and travel costs
In all industries, transportation and travel expenditures account for a significant portion of
trade expenses. Transport margins, business travel expenses, and the cost of time in transit
are among them. They absorb trade expenses in the agricultural and industrial industries. For
goods-related services like retail and wholesale, transportation expenses are especially
important. Finally, travel expenses account for over a third of cross-border supply costs in
business and professional services.
Travel restrictions and border closures were a big feature of the pandemic's first
governmental reaction. These actions have a direct impact on trade in products by
interrupting cargo transportation services, as well as trade in services in various modes of
supply by essentially preventing consumption overseas and reducing providers' physical
presence overseas.
Furthermore, these efforts have had a severe influence on business visits even in industries
that do not rely solely on overseas travel for product delivery. Face-to-face interaction is
frequently required for the establishment of commercial partnerships and the management of
global value chains, and it plays an important part in the creation of many services. For as
long as travel restrictions are in place, they are expected to result in a significant rise in trade
costs for this essential trade component.
2. Disruptions to freight transport
The performance of cargo transport services is crucial to trade costs in manufacturing. The
trade costs formula takes into account both the price and the timeliness of transportation
services. Maritime and road transit have been mainly operational since the start of the
COVID-19 crisis, though with some significant delays, but aviation freight movement has
been seriously impacted. Maritime transportation must deal with port logistics concerns.
Many economies have adjusted port regulations, ranging from port closures and crew-change
restrictions to increased paperwork requirements and physical checks on boats and crew
members coming from or having called at susceptible economies, causing maritime services
to be disrupted.
Furthermore, the marine freight transport business has reduced its supply of sailings to avoid
decreasing demand and decreasing shipping costs. As a consequence, while the cost of
container transportation in January and February was equal to the same period last year, the
economy's rebirth began to drive prices higher, and consumer demand began to revive,
resulting in a rise. It might take some time for pricing to revert to normal.
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