The economic effects of COVID-19 are significant, and are changing on a daily basis:
- S&P 500, Wall Street’s equities benchmark, plunged 9.5% on Thursday 12th. This is the biggest one-day drop since Black Monday of October 1987. The benchmark took 16 days to go from a bull market (that had started in 2009) to a bear market: this is the quickest descent in the history of the index. (A bull market is one in which we see sustained growth in shares and a strong economy, while a bear market is one in which we see share prices drop and a weak economy). The UK’s index, FTSE 100, also suffered its worst day since 1987. The index dropped by over 10%, wiping £160.4 billion off the market
- UNCTAD, the main U.N. body dealing with trade, investment and development, reports that the largest 5,000 multinational companies have seen downward revisions of 9% of their 2020 earnings. The sectors impacted the most severely are the automotive industry (44%), airlines (42%) and energy and basic materials industries (13%). (Note that this report was issued before recent events further impacting reported earnings, such as US President Trump’s ban on citizens of most European countries from entering the US)
- Regional development bank Asian Development Bank (ADB) finds that a moderate case estimate of the global impact of COVID-19 could be $156 billion (0.2% of global GDP), but could also cost up to $347 billion (0.4% of global GDP). ADB finds that production in China fell to 50%–60% of normal levels, but is now normalizing
COVID-19 is leading to quarantined factories, raw material shortages from China and a decrease in consumption. We are seeing the impacts on workers rippling through Asian supply chains. The figures of affected factories and workers change daily – here is a snapshot based on public information:
- In China, workers are being terminated or suspended with partial or no compensation, and paychecks are being cancelled or delayed. Research firm Gavekal Dragonomics estimates that China’s 300 million rural migrant workers could lose a combined US$115 billion in wages, an amount that would be impossible to recoup by working longer hours once production starts again
- In Cambodia, factories are suspending operations and paying partial wages to workers. The Cambodian Labor Confederation states that 33 factories have closed, resulting in suspension of 17,000 workers. The Garment Manufacturers Association in Cambodia (GMAC) states that over 30 factories have been closed, impacting 20,000 workers. The Cambodian government estimates that 200 factories will stop, or slow down, impacting 100,000 workers in total
- In Myanmar, where around 90% of woven fabrics come from China, 20 Yangon factories have filed closure notices, with the Myanmar Garment Manufacturers Association warning that half of the country’s 500 factories could shut down by March. (Update: On 15 March, U Thein Swe, Minister of Labour Immigration and Population, stated that approx. 4,000 workers had lost their jobs in Myanmar due to closures and reduction of workforce in 15 factories)
- In Sri Lanka, the Sri Lanka Apparel Exporters’ Association reports that 50 factories (50% of their members) are being faced with temporary closure
- In Bangladesh, the world’s second-largest garment manufacturing industry after China with 4,000 garment factories employing approx. 4 million workers, it is unclear how many workers will being impacted, but the number is thought to be high since 70% of the raw materials used in factories come from China
- In Laos, work on the China-Laos railway and the surrounding tourism and trade hub has been suspended in the absence of Chinese workers (managers and technicians) and Chinese tourists
“The ITUC is calling for urgent measures to ensure that workers who display symptoms can receive free health care and take sick leave without fear of losing their jobs or incomes”
Sharan Burrow, General Secretary of the ITUC and Phil Bloomer, Executive Director of Business & Human Rights Resource Centre, COVID-19 – time for governments, brands and employers to protect supply chain and precarious workers from hardship and infection (March 2020, BHRRC)
