Covid-19: Paralyzing the World

In December 2019, an unknown new virus from the corona virus family appeared in central China which quickly took drastic measures of containment and disinfection. However, the virus, comparable to that of the Spanish flu, is spreading all over the world paralyzing entire countries, causing psychosis and plunging the world into a crisis unprecedented since the Second World War.

We have been living for dystopian moments, exceptional moments worthy of the Théâtre du Grand Guignol. Never has anyone imagined that such draconian, coercive measures were going to be applied, that we were going to be slammed at home.

But the positive and very optimistic lesson to remember is that this virus has federated the whole world, the nations of the world live in total communion and it is unprecedented, everyone is fighting against the same demon which is the corona virus.

In addition to the considerable human suffering caused by covid-19, which has already killed more than 107,000 people worldwide, the pandemic has a strong impact on the world economy because of the confinements that have been taken in several countries, particularly in China and Italy. Hence the drop in production, following the disruption of the supply chain, a fall in transport, especially air transport, a decrease in investment. Almost all economic activity has been affected, as China is the backbone of international trade and « The factory of the world ».

China and now the whole world is trying to fight the spread of Covid-19. Many countries have declared a state of emergency and shut down their economies. To date, what are the main spin-offs of the epidemic, given China’s determining weight in international trade?

The progression of the Covid-19 affects many industrial sectors and increases the supply problems in the world …Globalization has propelled China to the heart of extremely complex logistics chains. In fact, companies around the world are dependent on Chinese supplies, which is why plant closings in the provinces affected by the virus have affected so many industries.

To what extent are the luxury, travel and tourism sectors today impacted by the fall in Chinese demand?

The airline industry is facing a severe blow and is expected to suffer losses that could range from $ 63 billion to $ 113 billion this year, due to the largest decline in air traffic in 11 years. Chinese tourists are the most numerous to travel in the world. They favor the Asia-Pacific countries and go mainly to Hong Kong, Macao, and Thailand. The latter country welcomed nearly 10 million Chinese tourists in 2019, or 30% of all visitors. Since the start of the epidemic, Thai authorities estimate that around 1.3 million trips have been canceled in February and March alone. But the impact in the tourism sector goes far beyond, as the epidemic spreads worldwide. The World Travel & Tourism Council (WTTC) estimates that 50 million jobs in the industry could be threatened, including about 30 million in Asia, seven million in Europe, five million in the Americas and the rest on other continents.

More generally, the countries that are economically linked to China will be most affected, namely Japan, South Korea and Australia. North America and Europe will be relatively less affected by the Chinese slowdown. South Korean automaker Hyundai was the first non-Chinese company to announce the end of production in factories located on its own territory due to a shortage of parts. Car manufacturers in Europe and the United States have said they will soon run out of components.

Our country Morocco, although less affected, is feeling the effects of the epidemic on its economy.

As economy is based on consumption, trade and tourism, Morocco could experience significant losses in 2020. So far, the main sectors affected are tourism, automotive and textiles.

Being also highly dependent on the European economy, the Kingdom’s economic activity will inevitably be impacted by the decline in European growth. As a reminder, the EU represents more than 58% of Moroccan exports, 59% of the stock of FDI, 70% of tourism receipts and 69% of transfers from Moroccans Residing Abroad (MRE).

Overall and given the freeze on economic activity, several key sectors could be affected by the crisis, mainly tourism, the automotive sector and textiles.

Automotive and textil

The effect of the Coronavirus could manifest itself, on the one hand, in the supply of increasingly scarce raw materials and inputs, and, on the other hand, in the fall in foreign demand. As a result, some activities have stopped (cars), others are struggling to find markets (textiles). Assembled products (e.g. from the automotive sector) are particularly affected since these consist of articles manufactured in several countries and, therefore, require a transit in their manufacturing process while several factories are currently stopped worldwide.

Automotive sector: The sector is currently at a standstill following the decisions of Renault and PSA, locomotives of the automotive sector in Morocco, to temporarily suspend their activity in the Kingdom from March 19. The temporary suspension of the activity of the two European groups has an inevitable impact on the entire sector. While the temporary cessation of Renault’s activity at its two production sites in Tangier and Casablanca concerns 11,000 employees, the suspension of PSA activities in the Atlantic Free Zone affects 1,600 employees and has repercussions on its equipment manufacturers and its 66 suppliers. The cessation of activity could ultimately have repercussions on the 180,000 individuals employed by the automotive industry, the 250 automotive equipment suppliers operating in Morocco around nine ecosystems (Wiring, interior vehicles & seats, metal stamping, battery, PSA, engines, Renault, Delphi and Valeo). As the country’s leading export sector, any drop in activity will have a strong impact on the trade balance.
Textile / clothing: The textile sector, employing more than 160,000 people in 1,200 companies, encounters both a problem with its supply and with its foreign demand. On the one hand, sector-level supplies are severely disrupted, as much of the raw material used comes from Asia, particularly from China. On the other hand, the sector suffers from a problem of visibility in terms of demand, in particular in view of the drop in European demand for textiles and clothing (Spain and France absorbing almost 60% of exports sector), leading to a drop in orders from suppliers, according to the president of the Moroccan Association of Textile and Clothing Industries.

Tourism

The National Confederation of Tourism (CNT) has evaluated the impact of the Covid-19 crisis at MAD 34.1 Md loss in terms of tourism turnover in 2020 and MAD 14 Md loss in terms of turnover hotel business, for an overall drop of almost 6 million tourists (-98%),which will cause a total loss of 11.6 million overnight stays. No less than 500,000 jobs and 8,500 businesses are at risk, including classified tourist accommodation companies, tourism catering companies, travel agencies, tourist transport companies and car rental companies

Transport

Air transport is suffering from the precautionary measures applied and the drop in demand. According to the International Air Transport Association IATA, the pandemic could cause Morocco losses of around 4.9 million passengers and a shortfall of USD 728 million. Air traffic disruptions could also put more than 225,000 jobs at risk. Road and rail transport are also expected to be affected by the crisis following the overall ban on the movement of passenger vehicles from 24 March.

The Coronavirus pandemic is one of the largest in the world. The number of Coronavirus cases is still increasing at high speed, the stock markets are plunging, whole cities are affected and confined, businesses are closing … the planet is in panic mode in the face of an unprecedented health crisis.

There are many lessons to be learned from this serious health crisis. First, the priority to be given to human health through training, equipping hospitals, and scientific research. This crisis has shown that globalization is real, and that any important event in one country has repercussions on the others. Hence the need to preserve multilateralism and international solidarity; Instead of each country taking national action, it would be better to have more concentration on the regional and international level, in coordination with the G20, the IMF and the World Bank. Finally, this crisis demonstrates the importance of research /development in the medical sciences, and the obligation to work together to find solutions.

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