Covid-19 Vs Economy

The Covid-19 crisis has only just begun for many countries: however, its economic impact is already apparent, and no one knows when the situation will return to normal. China is the first country to be affected by the epidemic; it is also the most affected economically. European countries, led by Italy and the United States are also suffering greatly from the consequences of the pandemic. So what can we expect in the coming months? How can each affected country, and the European Union as a whole, cope with this health and economic crisis, which has created more panic than ever on the financial markets? China, the birthplace of COVID-19, was the first country to suffer from the impact of COVID-19. The drastic containment, which required the closure or reduction of numerous large manufacturing and retail businesses, slowed down the Chinese economy drastically. According to the 6 March report of the Confederation of Chinese Enterprises (CEC), more than 95% of the 299 large manufacturers surveyed have seen their revenues decline.
Fortunately, as China managed to stop the spread of the virus, Chinese manufacturers have regained full capacity. However, whilst the rest of the world is going through a similar form of lockdown, the country’s economy is suffering a second blow with the closure of foreign markets. According to a paper by IMF economists, China will suffer from the reduction in global demand, which accounts for 20% of the Chinese economy. International trade has collapsed, and the Fund is forecasting a drop in the volume of trade in goods and services in 2020.

Since more than 3 billion people worldwide are confined to their homes, restrictions on movement have meant that people working in so-called non-essential sectors can no longer go to work, which has reduced supply and demand. In the United States, for example, as quarantine measures continually reduce economic activity, Morgan Stanley economists have predicted a 30 percent drop in consumption and an unemployment level of around 12.8 per cent in the second quarter. Indeed, the impact of the pandemic cannot be taken lightly as it affects everyone. The travel industry is one of the sectors most at risk due to travel restrictions put in place by governments around the world. Given the uncertainty underlying COVID-19, we can expect the global market to be quite volatile and there will be no global growth this year. Global supply and demand should return to normal. To achieve this result, policymakers have been forced to review their policies to mitigate the severity of the impact, but the virus remains the final factor in deciding when each country will be able to return to normal.

That aside, let’s look closely to the impact on our country, Morocco. Before analyzing the sectors impacted by this pandemic, we are forced to be at the macro level first, it is already known that 2019 was a critical year for Morocco with a very low growth rate compared to the average of previous years, furthermore, this year’s growth rate forecasts did not exceed the 3% 4% threshold.
In March, it was clear that our country will suffer from drought which was already noted in 2019 with 52 million less than 50% of the average of the last years, so we are in a continuous violent drop of the cereal harvest, this leads to a stagnation of demand. Based on this analysis, we conclude that Morocco is in a double shock (drought / Covid-19).Globally, there are 2 strategies to deal with this pandemic: a first which consists in preserving economic activity therefore a sacrifice of the health of a certain population, or a second which consists in preserving health through containment and a partial cessation of activity.
Morocco has opted for the second strategy by stopping economic activity which causes a shock to the level of supply, hence a drop in production for certain sectors, obviously an increase in unemployment, decrease in income, arriving at the decrease in consumption, so we find that the shock started for supply and ended with a shock for demand.

Morocco is in an unprecedented crisis because it is a widely open country and that actually led to impacting the main engines of the economy:
1-Foreign trade:
-Exports : Unfortunately our exports are concentrated on the European Union and more precisely France and Spain which are among the countries most affected by this pandemic as well as China which has become in recent years an important player in our foreign trade, therefore exports are declining.
-Imports: the decrease in the cereal crop generates an increase in the import of food products but this can be offset by the decrease in investment which we talked about before will decrease the import of capital goods according to forecasts the percentage varies between 25% and 50%,
As well as a 35% drop in oil on average compared to 2019
2- Tourism:
This sector is among the sectors most affected in Morocco with the stopping of air travel, according to CMC forecasts we are talking about a shortfall of 35 billion DH, the fact that we can catch up this deficit is very difficult but one can make up for part with domestic tourism during the summer if the containment is finished.
3-Transfers of Moroccan residing abroad (MREs) :
Same case for exports, these transfers are concentrated more at the level of the 3 most affected countries by this crisis (France, Spain, Italy) hence a significant drop in the balance.
4 – INDUSTRY:
Starting with the automobile, this sector is seriously affected with the closure the 2 major players RENAULT and PSA which has lowered production, and caused a job loss of 180,000. We are also talking about the textile sector which has experienced a supply disruption as well as a drop in global demand, without forgetting the fall in external demand which should negatively impact the extractive sector. This drop could be amplified by a possible drop in the price of phosphate because of the declining foreign demand.

In conclusion, the Covid-19 pandemic affecting all humanity is novel and could have catastrophic consequences if it lasts too long and if governments do not take the necessary measures quickly. It is hoped that, faced with this mortal danger, the Heads of State will forget their quarrels and try to find, notably at the level of the G20 and with the help of the World Bank and the IMF, a collective solution to preserve the future of the world.
Other lessons can be drawn from this pandemic, such as the readjustment of globalization, the priority to be given to health, education and human development. Not forgetting the fight against social and territorial inequalities, and finally, respect for ecology and the promotion of the green economy. An urgent call for immediate aid in terms of medical equipment and healthcare staff for Africa ,where the pandemic is currently developing in proposals that could be catastrophic.