Coronavirus outbreak: What are the socio-economic implications to Uganda and the world?

By Prosper Mubangizi

In the wake of the outbreak of the COVID-19 also known as Coronavirus, the dreaded term ‘social distancing’ has found its way back into the grammar of all persons including the anti-capitalists and the deeply religious people that attach strong values to communitarianism and social cohesion. For me, the greatest impact of coronavirus is social distancing which has not only threatened to shatter into pieces the little remains of social cohesion which were already at the mercy of the individualistic values and strong beliefs in the market forces of demand and supply which are the cornerstone of capitalism.

Far from the health implications, the coronavirus outbreak is more detrimental to the economy and poses a huge threat to the international finance structure perhaps more than wars or market failures. Since January 2020, the international markets have suffered both supply and demand shocks as business disruptions have lowered production hence creating shocks to supply. This has been worsened by lowered demand as both consumers and businesses are reluctant to go into expenditure mode. Furthermore, there is lessened productivity as more and more workers are being put out of action either through isolation to avoid getting infected or infecting others, care provision to sick children and relatives or through death. This has created a productivity shock that is being worsened by quarantines and travel bans to certain ‘high risk’ nationalities like from China, Japan and other affected countries.

With quarantines and lockdowns or travel bans, the effect on the global supply chains is enormous and may lead to de-industrialization if governments don’t come up to help with policies targeted at subsidizing production. A case in point is China which is a global supplier at an intermediate level of electronics, automobiles, machinery and equipment. The disruption to China caused by lockdowns and travel bans have created knock-on effects to downstream firms in the manufacturing sector world over. The result is a rise in business costs and constitute a negative productivity shock, reducing economic activity.

An article by the International Monetary Fund (IMF) shows a disproportionate effect on the travel industry with airlines being the most hit by the coronavirus epidemic. The International Monetary Fund postulates that the services industry such as tourism, travel among others have been hit more than the manufacturing sector.[1]This gets exacerbated by the gruelling fact that workers in service sectors like in China which are mainly informal are more affected as it is unthinkable for them to count on social services if they take time off yet their jobs require regular contact with other people. As a result, the people who can least afford care are often at the greatest risk of transmission.[2]

It should be noted that economics is a behavioural science with a cause and effect relationship between different phenomena as witnessed by the falling value of the airline business world over resulting from the coronavirus. For instance, the February 20, 2020, US equity market selloff has seen airline stock prices fall sharply much like after the 9/11 terrorist attacks but lower than after the global financial crisis. Actually the New York Times posits that what makes the pandemic deadlier is not its health consequences but its worsening of social and economic divisions with a self-reinforcing cycle whose effects can transcend generations.

This implies serious policy concerns for a country like Uganda is appropriate socio-economic measures because our health care system is not prepared to handle adequately a contagious virus. Uganda only has 55 Intensive Care Unit (ICU) beds while the capacity of isolation centres to handle the situation is a little doubtable and were the virus to be deadly, it could wipe out thousands and thousands of people. But the country needs to be prepared to handle the socio-economic cost of coronavirus. Policy interventions to handle productivity shocks and other market shocks should be put in place. There should be government-led social protection measures to aid the workers that are likely to be laid off in hard-hit sectors like the hotel and tourism sector in Uganda which has seen a 2500 hotel rooms cancellations in just March amounting to a USD 1.5M loss before even a single case of coronavirus is reported and confirmed in the country. The government should subsidize production cost for manufacturers as a way of dealing with the markets shocks in both demand and supply, subsidize social amenities like accommodation as such pandemics tend to spread overly in areas with insufficient and poor accommodation facilities, water and electricity in anticipation of lockdown as well as avail cheap and affordable essential goods and services like food, sanitary products and medicines to its citizens using a means test so that the priority is the most or most likely to be vulnerable populations.

Lastly, Coronavirus can be defeated; that is a given but at what cost to the economy and social fibre were Uganda to be hit by the virus? What is going to be done to ensure that people don’t slide more into poverty and vulnerability in the aftermath of the pandemic? How we prepare to respond to the pandemic in socio-economic and medical terms is what will set us apart as the pearl of Africa or as the laughing stock of the world.

[1]https://blogs.imf.org/2020/03/09/limiting-the-economic-fallout-of-the-coronavirus-with-large-targeted-policies/

[2]https://www.nytimes.com/2020/03/15/world/europe/coronavirus-inequality.html

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