Tourism declines, there is a significant downturn in air transport, factories close, major developments are terminated, and unemployment is rampant – these are the things listed among the worst economic effects of the coronavirus. Let us see the most serious impacts on the European and Hungarian economies.
News can be heard about the drastic steps taken in Europe – including the cessation of production, the closing of factories and shops, staff reductions, profit warnings – carried out by great international companies (along with governments and economic professionals) due to the spread and devastating effects of the coronavirus.
According to Hungarian news portal Portfolio, the worst economic effects of the coronavirus in Europe can be listed accordingly (in chronological order):
In the first phase, authorities tried to trace the routes of the infection in order to defeat the disease. This was realised by local restrictive action.
As a result of the security measures, a significant decrease has been seen in the tourism sector, including hospitality, event management, and transport services.
When the majority of governments realised that mass illness cannot be avoided, the epidemic arrived at its second phase.
The territorial and personal quarantines, movement restrictions, and introduced steps against further infection have a serious impact on the economy of every European country (and globally as well).
These steps led to factory closings, the shutdown of services, supply difficulties, and serious problems in the global value chains. Beyond the immediate, severe economic effects, these challenges endangered other non-touristic companies as well.
Furthermore, the current uncertainty can lead to further economic decline.
The actual factors, including production disruption, weak economic stability, declining productivity growth, and revenue shortfalls, could put the indebted companies into liquidation.
According to experts, these are the 5 worst economic effects of the coronavirus in Hungary:
- Huge losses in the tourism sector, including hospitality and the related “service” industries. The situation affects all actors in the sector – from Airbnb homes to small village pubs.
- Hundreds of thousands of people become jobless – according to the government, the only question is how many hundreds of thousands of people will become unemployed.
- For an indefinite period, production is stopped in the majority of car factories – Mercedes, Audi, Suzuki – that significantly contribute to the Hungarian GDP. As a result, Hungarian suppliers are also negatively affected.
- Forint reaches its historic low – The euro exchange rate jumped to 360 from 335 within a few days. According to some analysts, soon HUF 400 will be asked for EUR 1.
- The construction industry is in a difficult situation as well; major projects might be temporarily stopped. Due to the border closures, job losses and slower freight, a shortage can be expected regarding building materials. As a result, construction projects might be stopped for an indefinite period or might lead to the delay of several projects.