The COVID-19 pandemic is primarily a global health crisis, but it has had vast economic and social repercussions. Even with certain economies slowly and cautiously reopening, the combined effect of the pandemic and the necessary mitigation measures, such as prolonged lockdown and physical distancing, has led to a global recession largely because of the rare twin supply-demand shock.

The twin shock caused by the outbreak has important implications for business. First, the supply shock reduces the economy’s ability to produce goods and services at a given price because of the closure of non-essential industries and physical distancing measures. An industry’s reduced capacity to produce goods, for example 60 percent of its pre-crisis output, contributes to the supply shock.

The demand shock reduces the consumer’s ability to purchase goods and services at a given price because of increased demand for healthcare-related products and a decrease in high-risk activities, such as going to restaurants or travelling. Loss of income could also contribute to the demand shock as this decreases the demand for purchase such as homes, cars and other appliances.

Please select this link to read the complete article from World Economic Forum.