Impact of Covid-19 on Multinational Companies in the Global Economy

impact of covid-19

Table of Contents

Covid-19 or Corona Virus Diseases is a new pandemic that must be faced by all groups globally. This virus first appeared in the city of Wuhan, Wubei province of China.

This virus has spread to all parts of the world and resulted in many casualties. The number of cases that continue to increase is very significant, ultimately causing concern in all aspects of life.

This virus can be said to be quite dangerous because it spreads fast enough through human transmission and attacks a person’s immunity so that it can lead to death for those who have congenital diseases.

Many countries are not ready to deal with this pandemic outbreak because this epidemic also appears suddenly and the impact is quite large, covering all global aspects.

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All sectors of life in the world are seriously threatened because of this pandemic which is not over. Primarily in the health sector, the economic and industrial sectors, the government sector, the education sector, the tourism sector, and all levels of society will certainly feel the impact. Some of the activities of our daily life that we normally do have started to stop.

Countries around the world are trying to take the right policies to be able to keep their countries under control.

Countries have also issued policies quickly to deal with COVID-19, such as they imposed a Lockdown on their countries so that the spread of this virus does not increase. It is feared that if a country has experienced an economic recession, its recovery will also take a lot of time.

Threats to the Global Economy

This pandemic is a major threat to the global economy. Almost all orders of life change drastically, especially in the economic sector as indicated by the decline in economic growth in each country which causes considerable losses in the global economy.

All global economic activities also began to decline. Many people also have to lose their jobs, which work is their main source of life. Even now, companies have started laying off their employees because the industries are no longer running normally.

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If an industry does not have income and entry, the number of unemployed worldwide will certainly increase sharply. In addition, people who work in the informal sector whose income is uncertain will experience a reduction in their income.

The bad impact of the global economy which is getting worse due to this epidemic will cause economic restrictions. Where all activities or operations related to the economy will be limited. In addition, the impact on the global economy will also affect the weakening exchange rate.

Multinational Companies are at Risk from this Outbreak

Multinational companies are companies that participate in international business where they put their production facilities in various countries that involve economic production and play a role in international trade and investment.

Multinational companies not only export and import their products to certain countries but also carry out operations on the production of goods and services and also establish subsidiaries or host countries in foreign countries to maximize the value of the multinational companies themselves.

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Within multinational companies, the Covid-19 pandemic disrupts the company’s production chain which results in business operations and investments that cannot run properly. This of course makes the world’s multinational companies have to issue statements regarding delays in capital expenditures in their host countries.

As reported by CNN Indonesia, there are reports that on average the top 5,000 multinational companies have predicted a decrease in their income of up to 9% in 2020 due to the Covid-19 outbreak. From this we can conclude that the impact of the Covid-19 pandemic has also decreased the direct investment of multinational companies, so they must try hard to deal with this problem.

In addition, the existence of lockdown policies in various countries has made multinational companies also have to postpone their business operations to slow the spread of the Covid-19 virus and this pandemic affects the supply of raw materials and affects its production.

Multinational Companies in China

For example in China, several multinational companies were forced to stop their operations. As we know that China is a retail market for multinational companies in all parts of the world when the arrival of this pandemic will automatically put a global business at risk all over the world.

So that the supply chain of raw materials to other multinational companies must stop and cause the export-import of production raw materials to be hampered so that it has an impact on the distribution of goods, capital, services which can affect the decline in Gross Domestic Product.

Multinational companies whose operations are severely hampered are such automotive companies and electronics companies.

Where they are usually in their operational activities so far have experienced an increase in the amount of production and the number of consumers who have increased, but as a result of this outbreak, they have suffered losses.

If the world economy continues to deteriorate, it is possible that global economic restrictions will be imposed, resulting in a reduction in imports of consumer goods from developing countries.

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Besides that, multinational companies in this pandemic are needed because not all countries can produce their goods so that when economic restrictions are imposed it will cause the restriction of industrialization activities throughout the world.

In addition, multinational companies do not all experience a decline in operations and production results. But because of this pandemic, they made a sizable profit.

As we can see that the Covid-19 outbreak is attacking human health, multinational companies engaged in health, household needs, and foodstuffs will benefit from this pandemic. This is because these fields are one of the primary needs where everyone definitely needs them for their daily life.

Multinational Company Cooperation Efforts

Governments and multinational companies should also cooperate to maintain the stability of the world economy. Given this pandemic, the spread of the virus is carried out rapidly so that if it does not take clear steps it is feared that it will have a bigger impact on the global economy.

Multinational companies, which are the drivers of the global economy and have substantial economic assets, must also start making new operational and investment policies to maintain the production chain.

If multinational companies continue to follow the flow of this pandemic that is never over and does not make new steps, it is feared that all global economies will be threatened.

In addition, a collaboration between multinational companies and other business fields is also needed to deal with the Covid-19 pandemic so that the main needs of people in the world will also be met and their distribution is not hampered.

The government must also continue to make efforts to control spending during this pandemic so that the value of economic growth does not continue to decline.

Berliana Pundilaras

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