COVID-19 Has Impacted the World Economy Catastrophically

Apr, 2021 - By WMR

The effect of COVID-19 on the foreign exchange market was devastating and as the world's major economies declared a state of emergency and imposed travel restrictions in March 2020, the foreign exchange industry, like other sectors, was effected.

As COVID-19 cases were at its peak, unemployment hit extreme levels, and remittances dropped to tragic lows. There was no market for foreign exchange because people were too concerned with securing their livelihoods. The condition has significantly improved, but the path to full recovery remains uncertain. Due to the COVID-19 crisis, the foreign travel industry was one of the worst-affected markets, and the ban on international flights effectively shut down the market. Many businesses that deal with forex cards, international remittances, currency exchange, and travel necessities such as tours, travel insurance, international SIM had to fully cease operations. A large number of business meetings were also conducted through the internet. Face-to-face meetings were replaced by Zoom calls. The World Bank estimated that low-income emerging economies would lose US$ 110 billion in 2020 as a result of COVID-19, the largest drop in remittances in modern times. International money transfers, also known as remittances, are cash flows sent home by foreign workers to support their families and are a significant source of income in low- and middle-income countries.

However, due to panic purchasing, increased use of supplies to combat the pandemic, and disruptions of factories and logistics in mainland China, supply shortages are likely to affect a variety of sectors. Due to a large increase in the number of COVID-19 cases outside mainland China, global stock markets plummeted on February 24, 2020. Stock markets around the world had seen their biggest single-week losses since the 2008 financial crisis. In March 2020, global financial markets collapsed, with big indices falling by several percent. At the same time, as China's economy began to recover in the summer of 2020, the U.S. economic efforts failed by a second wave of the flu that swept the world.