EC The True Economic Impact Of COVID-19

Europe faces a tough recession generated by the COVID-19 pandemic. As the second wave hit the old continent, the economic growth perspectives declined too. 

Small businesses are the ones that were hit the hardest by the pandemic. This impact is not exclusive to Europe, but in the United States too. In the last six months, the number of small businesses declined by 25% in the US alone. Considering what happened earlier this year, the second wave will likely bring much higher numbers in Europe.

New Lockdowns Affect Small Businesses

The big difference between Europe and the United States is that throughout Europe, governments intervened to support small businesses. For example, Germany just announced the closing of bars and restaurants for a month. However, at the same time, it announced a €10 billion injection to support the affected businesses.

In the United States, small businesses did not benefit from such support. All the Fed could do was to provide favorable lending conditions. But who wants to borrow in such uncertain times? As such, closing the business is more lucrative, at least until the world can control the pandemic.

The problem is that the small business sector employs a large number of people both in Europe and the United States. As such, the sector is a pillar for economic growth and its health influences economic performance.

The second wave of the pandemic brought with it a significantly higher death toll across Europe. France, UK, Spain, Italy – they all reported this week their highest numbers since April/May. With the new restrictions already in place in all these countries, the first thing we will see is an impact on the oil demand.

As such, the price of oil will decline. This alone will trigger lower inflation, which will impact future economic growth too.

The point here is that the decline in the small businesses will likely continue, if not accelerate, moving forward. Of course, the social and economic consequences of the pandemic vary across countries and continents. Moreover, it appears that weather plays an important role. As winter reached Europe, people spend more time inside; favorable conditions for the spread of the virus when gathering in larger numbers. New lockdowns are inevitable – the big question is, for how long and what will be the final impact on small businesses?

Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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Moon Kil Woong 3 weeks ago Contributor's comment

Small and medium sixed businesses are going under or are being cannibalized and Washington doesn't seem to care.

Kevin N. Harris 3 weeks ago Member's comment

What about all those programs like PPP to help cover business's costs so they could stay open?

Moon Kil Woong 3 weeks ago Contributor's comment

Stimulus only lasts so long and like so many other government give aways, the big guys ate a lot of what was meant for the Small medium sized businesses.

Kevin N. Harris 3 weeks ago Member's comment

That's true. Though I was really shocked that the government failed to put together another stimulus package. A lot of people are really suffering. Hopefully right after the election they'll get back to doing their job and push something through.

Angry Old Lady 3 weeks ago Member's comment

More likely the government will be tied up with contending with Trump's numerous frivolous lawsuits and orchestrated riots when Biden is declared the winner.

William K. 3 weeks ago Member's comment

An interesting but depressing analysis, and nothing in it that I could argue against. When bad news is correct then it is certainly bad indeed..

One interesting analysis that came from one friend is that this is the run-up to JUDGEMENT DAY. That is an interesting explanation that would certainly alter our responses.

No matter what, though, the impact on small businesses will continue to be devastating, and the impact will take a very long time to recover from. The bothersome part there is that whatever the recovery is like, it will undoubtedly be much less fun that our world was prior to this plague. It is very unlikely that all of this technology will be used for good.

Harry Sinclair 3 weeks ago Member's comment

The big question is, will anything change depending on who wins today's election?

William K. 3 weeks ago Member's comment

The bigger question that I offer is "will whatever changes are made be the correct choice?" Clearly Mister Trump made a bunch of wrong choices at the start and the result is that many have died "rather hard." Presently none of the leaders or wannabe-leaders have come up with any new solution, other than Shut-Down and Mask Up. Rather effective but deadly for most businesses.

Adam Reynolds 2 weeks ago Member's comment

Many scientists said that masks could save hundreds of thousands of lives and even be more effective than a vaccine. Biden said he'd favor a mask mandate without a shutdown.

Ayelet Wolf 3 weeks ago Member's comment

The US is lucky it has the resources to inject as much money into the economy as it has. Some poorer countries are doing absolutely nothing to help it's people. Even some of the more advances countries have left it's population to fend for themselves. Like I know in Israel, small business owners, independent contractors and the self employed are receiving absolutely nothing in financial aid.

William K. 2 weeks ago Member's comment

I am thinking that eventually that injected money is going to bid up the prices of many of the things that I need, such as food and medicines, effectively reducing the value of my savings and investments. How long before that happens, I am not sure. BUT considering that the FED bank loves inflation, I know it is coming.

Ayelet Wolf 2 weeks ago Member's comment

Why would that be? I don't follow.

William K. 2 weeks ago Member's comment

Why would the fed push towards inflation? Or why woud the prices go up? First, the fed ALWAYS does what it believes will help the stock market. That track record is clear. And they openly tell us that 2% INFLATION IS THEIR TARGET AND THAT IT IS GOOD.

Now as for prices increasing, that is what I call the "auction effect", which means that whatever is sold goes to the one willing to pay the most for it. And then, just like a regular auction, that is the starting price for the others who want to buy the more of same item.

Ayelet Wolf 2 weeks ago Member's comment

I see now, thanks for clarifying.