The Coronavirus Economy: How Bad Will It Get?

The epidemic, and the weapons being used to fight it, are having devastating effects on the economy.

Seoul stock exchange on March 18
Seoul stock exchange on March 18
Jean-Marc Vittori

PARIS — How can such a tiny creature wreak so much havoc on the economy? The novel coronavirus, which has killed 0.00006% of the world's population to date, has already cost shareholders $2.5 trillion in a single day. And it is estimated to erase at least $1 trillion of GDP in 2020, according to experts from the United Nations Conference on Trade and Development.

According to some, such disarray can only be explained by irrational behavior or Keynesian "animal spirits." While it's all moving a bit fast, logical decisions can explain most of it.

The starting point: a deadly and contagious virus, one that makes men and women sick, sometimes to the point of losing their precious lives. The effect: the most effective short-term solution to contain the illness is isolation. In 1720, the southern French town of La Ciotat was spared from the plague — which killed a quarter of the population of the surrounding region — because the walls surrounding the town allowed the filtering of comings and goings. Similarly in 2020, China succeeded in reversing the coronavirus epidemic by drastically limiting travelling.

More than the irrational, it is uncertainty that dominates.

The public authorities in France are interested in restricting movement to slow the spread of the epidemic over time in an effort to avoid congestion of hospitals, French Minister of Health Olivier Véran explained. From there, it will become possible to identify the major levers of the epidemic on the economy, pertaining to supply and demand, the "real" and the "financial." The potential impact is massive.

1. Production

In China, at the beginning of February, authorities ordered factories to close (or rather, not to re-open after New Year's celebrations) in the highly industrialized region of Wuhan where the epidemic started. Tens of millions of Chinese people were asked to stay at home. Transport services were severely reduced. At the health level, these decisions are justified. Economically, they weigh heavily on Chinese production, which could fall in the first quarter of 2020 for the first time in over 40 years. This same dynamic is now spreading across Europe. Italy has been hit hardest by the epidemic, with the whole country in quarantine since March 9. Here too, activity will inevitably decline, along with economic exchange.

2. Supply

The closing of certain factories blocks others downstream which depend on their production. Stretching over the past 20 years, the "value chains' cannot withstand the breaking of a link. Carlos Tavares, CEO of car manufacturer PSA, gives an example: "Of the 4,000 parts making up an automobile, 3% come from China. But if we are missing a single part, we cannot deliver the car." Manufacturers will have to organize themselves differently, with shorter and more local chains. In the meantime, they risk being blocked.

3. Work

The virus sends some employees to the hospital and condemns many others to isolation. In China, travel restrictions have trapped millions of vacationers away from work ... All of this causes a loss of manpower and therefore, production. Not to mention the indirect impacts. The closure of schools in Japan and Italy is forcing many parents to stay at home, since sending the children to their grandparents' is out is out of the question, the latter being more susceptible to the virus.

4. Demand

Supply is not the only one to be struck by the virus. Planes fly, but few travelers want to risk of not being able to return for weeks due to quarantine measures, causing the travel industry to take a massive hit. Public places are deserted because authorities have limited access to them (salons, concerts, sports fields) and consumers don't dare going out (hotels, restaurants, shops). The side-effects of this are daunting: weakened airlines will buy fewer planes, employees with reduced incomes will spend less: After exports, investment and consumption will suffer.

5. Financing

In many companies, revenues fall faster than expenses. Bank accounts will tighten, as seen in the end of 2008. It will be difficult to repay loans with corporate debt rising high. The banks are also likely to suffer in turn. Investors have reason to worry; no one knows the duration and extent of this epidemic. No one can quantify the power of each of these levers, and nobody knows what the government is truly prepared to do to limit the economic damage. More than irrational thoughts, it is uncertainty that dominates now. And that is the real poison for the economy.

For the coming weeks, Worldcrunch will be delivering daily updates on the coronavirus global pandemic. Our network of multilingual journalists are busy finding out what's being reported locally — everywhere — to provide as clear a picture as possible of what it means for all of us at home, around the world. To receive the daily brief in your inbox, sign up here.

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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