COVID-19 Economic Recovery Indicators

Part
01
of three
Part
01

Signs of Economic Recovery - China

China was the first country to be hit by the deadly virus and it has also become the first country to have defeated the virus. The country is already showing signs of economic recovery, the details of which are provided below.

Back to Normal

  • With China achieving success in the fight against coronavirus, the country's economy might start to recover soon from the impacts of the virus. Chen Yulu, deputy governor at People’s Bank of China, said, "Economic indicators will likely show significant improvement in the second quarter and the Chinese economy will return to its potential output level rather swiftly."
  • There have been reports of factories and workplaces going back to normal in China. Estimates from Bloomberg Economics have shown that 85% of the activity has already returned.
  • According to the Ministry of Commerce, approximately 70% of the key import and export firms have already resumed work with production capacities going up to 70%. However, as the industry is going back to normal, China might face a shortage of demand due to the virus spreading in other countries including Europe and the US.

Retail Bouncing Back

  • The retail sector in China is also showing positive signs after the country's fight against coronavirus has proved effective.
  • Foot traffic in malls has been reported to have increased. A US-based company has reopened 42 of its retail stores in China.
  • Other retail operations opening back up for public dealing include Hermes's retail stores and 85% of the 3,600 retail stores of the jewelry giant, Chow Tai Fook Jewellery Group Ltd.

Stocks Gaining Strength

  • As China became the first country to win the fight against COVID-19, the economic collapse that is visible through global financial markets is not being seen anymore in China.
  • Chin Ping Chia, Hong Kong-based managing director and head of business strategy and development at China A investments, noted that "a lot of investors appear willing to look beyond the ugly short-term hit the country's economy is taking to contain the virus."
  • Aaron Costello, consultant at Cambridge Associates LLC, said, "China has emerged as an unlikely safe haven, given both the stability of its yuan in foreign-exchange markets and the fact that the A-shares market has held up better than expected."

Eyeing April

  • As China fights back and activities start going back to normal, there are speculations that the country might still not be able to quickly return to where it was before the virus hit due to several reasons. The reasons include the spread of the virus to China's key trading partners, managing the logistics of the return of workers from their home provinces to where they work, and other similar reasons.
  • Despite these concerns, ANZ Research Institute expects most economic activities going back to normal by the first half of April.

Shipping Rates Improving

  • With factories resuming production, "freight shipping rates for dry bulk and crude oil have begun to show early signs of recovery."
  • The Baltic Dry Index, which had plummeted to a low of 411 on February 10, rose to 617 until March 6. The index was at its peak of 2,518 on September 4th during 2019.
Part
02
of three
Part
02

Signs of Economic Recovery - Japan

With the coronavirus hitting Japan and numbers going up every day, any economic recovery in the country seems unlikely, at least for the next few days. The details about the current situation of the virus, the economy, and the role of the government in the entire situation have been outlined below.

Current Situation

  • As per the latest update, the coronavirus death toll reached 49 on Sunday, March 22 after 5 more people died from the virus that day.
  • Additionally, 46 new cases were also diagnosed on the same day. This rate, on average, is about the same as it has been for the past few days, which suggests that the virus has not slowed down in the country.
  • The Japanese Prime Minister, Shinzo Abe, who has been insisting that the 2020 Tokyo Olympics will be held as per the original schedule, hinted for the first time that the Olympics may have to be postponed. This suggests that the epidemic has not shown signs of a slowdown and maybe getting even worse.

The Retail Sector

  • The auto and retail sectors in Japan are hit by the coronavirus with key players in both sectors seeing a decline in sales.
  • 4 major department stores in the country have seen a decline in sales during February, partially due to the decline in the number of foreign tourists amid the COVID-19 outbreak.
  • The disruptions in manufacturing supply chains might continue to show up in upcoming economic data.

The Travel Sector

  • The travel sector in Japan has received a major blow due to the plummeting numbers of Chinese tourists after the country's government banned international group travel.
  • The travel sector has also been impacted due to the Prime Minister's request to postpone or cancel large events, which resulted in the closure of tourist attractions.
  • Reportedly, the numbers (of tourists to Japan) went down by about 58% during February.

The Finance Sector

  • Japan is part of the G20 group, which is an alliance of 20 countries. In the wake of the coronavirus, members of the G20 vowed to closely monitor the virus and its impacts on their economies.
  • The delay of the Olympics is already causing distress to some businesses in Japan and things may become very bleak if the Olympics are postponed.
  • The companies that were hoping to earn large profits from the Olympics now fear for their future.

Role of the Government

  • Japan's government is planning a stimulus package worth ¥13 trillion ($119 billion) to ease the economic suffering caused by the coronavirus. If the private sector, as well as other spending, is also included, the package can go up to ¥25 trillion ($231 billion).
  • The package will "fund improvements to medical facilities, ease the supply and demand of masks, promote working from home, and provide subsidies to working parents who must take leave because of closed schools." The package will focus on funding small and mid-sized businesses.
  • Haruhiko Kuroda, governor at Bank of Japan, said that the central bank "will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases."

Positive Signs

  • The only positive sign, if it can be considered as one, in terms of economic recovery in Japan is that businesses believe that it might take several months for them to recover from the impacts of the virus, however, they are ready for a long battle to regain their economic strength.
  • In terms of recovery, "43 percent of firms said it would take several months for the virus impact on their business to be resolved, and another 22 percent saw no end to it for the foreseeable future, the poll showed, in a sign corporate Japan is bracing for a long battle with the virus."

Research Strategy

To provide post-coronavirus signs of economic recovery in Japan, we started by determining the current situation of the virus in the country and whether the spread of the virus has slowed down at all. Our findings suggest that the virus has not slowed down. Despite that, we continued to look for any signs of economic recovery and focused our research on retail, travel, and finance verticals. Upon investigation, we found that all three of these verticals are facing adverse conditions for business and any signs of economic recovery seem non-existent. As a last resort, we tried to determine if the country's overall economy is showing any positive signs in terms of recovery but to no avail. As an alternative, we have provided details about the current situations in the three verticals as well as the initiatives being pursued by the government to improve the situation.
Part
03
of three
Part
03

Signs of Economic Recovery - South Korea

South Korea seems to have taken control of their coronavirus situation proactively, however, economic indicators do not portray a praiseworthy picture of the country's economy. The details about the current situation of the virus, the economy, and the role of the government in the entire situation have been outlined below.

Current Situation

  • South Korea seems to have "flattened the curve" and the number of new infection cases in the country has stabilized in recent days. The country made this possible through stringent measures such as quarantining people and mass testing.
  • According to sources, Korea has been successful in not only flattening the curve but the number of new cases seems to be going down.
  • According to the latest updates, the death toll in the country has reached 120 with the total number of cases now at 9,037.

The Economy

  • Although the number of new cases in South Korea has decreased and the spread of COVID-19 has indeed slowed down, the economic crisis seems to be getting worse.
  • The financial markets have been reported to be crashing and KOSPI and KOSDAQ have even activated the 'circuit breaker' for the first time.
  • Markets as well as businesses, especially smaller ones, are temporarily shutting down in the country to stop the spread of the virus and due to the absence of consumers in the markets.
  • The virus has not only forced businesses to close down but also dented consumer spending and exports are reducing.
  • Travel and tourism have also been badly hit by the coronavirus and there are no signs of recovery so far.
  • According to predictions, if the spread of the virus does not increase again and the slowdown is there to stay, sectors that have been hit hard by the virus might be able to rebound. These sectors include "semiconductor, handset, cosmetics/retail (duty-free), bio, banking, securities, media (cinema), games(small/mid-caps), auto parts, oil refining, shipbuilding, and transportation."
  • According to South Korean Deputy Prime Minister for economic affairs Hong Nam-ki, the economic recovery in the coronavirus-hit South Korea, and the world, will take 2 years for the U-shaped recovery.
  • Retail, travel, finance as well as many other sectors are showing a downward trend amid the coronavirus impact.

Role of the Government

  • The government has announced plans to support businesses that have been impacted by the outbreak of the coronavirus.
  • The government has already spent $3.3 billion and plans to invest another $16 billion in emergency spending. It has also "pledged to push for another $5 billion in supplementary budget spending in March. The central bank, for its part, has expanded its special loans program by $4.1 billion to boost liquidity."

Research Strategy

To provide post-coronavirus signs of economic recovery in South Korea, we started by determining the current situation of the virus in the country and whether the spread of the virus has slowed down at all. Our findings suggest that the virus has indeed slowed down and the country might be on the right path to recovering from the devastation caused by the virus. Despite that, we continued to look for any signs of economic recovery and focused our research on retail, travel, and finance verticals. Upon investigation, we found that all three of these verticals are facing adverse conditions for business and any signs of economic recovery seem non-existent. As a last resort, we tried to determine if the country's overall economy is showing any positive signs in terms of recovery but to no avail. As an alternative, we have provided details about the current situation as well as the initiatives being pursued by the government to improve the situation.
Sources
Sources