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Asian Journal of Multidimensional Research (AJMR)
https://tarj.in
123
AJMR
with theory, since nobody knows what will exactly be in the future, people tend to assume the
worst and based on this to make the best decision (Sorensen and Whitta-Jacobsen, 2010). To
illustrate, the recent Japanese data on consumption have been considered (Watanabe, 2020). As
observed, total consumption in Japan demonstrated a 15% fall based on the credit card purchases
for January-March, which thereby shifted aggregate demand. In addition, World Bank (2020)
forecasts international trade expenses and real Chinese consumption by households to decline by
25% and 7.2%, respectively. Prices level is directly influenced, in turn. The COVID-19
pandemic threatens to turn into the main accelerant of goods‘ prices increase. Since the unit
price of exports and imports rises due to the higher trade costs (border closures, additional
inspections, etc.), prices of final goods inevitably climb as well. To support this, in Japan the
annual expected price level increase was about 0.9% at the beginning of the year but as of
March, it reached almost 1.5 percent (Watanabe, 2020). Nonetheless, it is worth mentioning that
prices in energy and base metals experience a dramatic fall. It is primarily associated with the
situations in China, the US, and the EU. Being the biggest consuming economies, they
temporally shut down the production so the demand for energy and metals and their prices
decrease. For example, the Siberian and Southern Ural companies of Russia face enormous
losses. Together with that, the plans of Saudi Arabia of oil mining raise cause price collapse in
stock markets raising the possibility of negative oil prices.
There is a strong association between exchange rates and trade. Due to the global trade crash,
large capital outflows, especially from emerging markets, can be observed, implying exchange
rate stress. US dollar is pointed out to tend to appreciate during the crises and COVID-19 time
holds historical assumption true. As of now, dollar appreciates relatively the other world
currencies. The countries need to tackle the issue of depreciation of their local currencies,
therefore almost 80 countries have already requested IMF financial help because they record
over 83 million USD outflow as of end of March (Corsetti and Marin, 2020). To demonstrate,
the Russian commodity economy depends on oil prices and shows the drop of the own currency
value amid the pandemic uncertainty and failed OPEC+ discussions. Ruble has ranked top
second in volatility currencies against USD, depreciating by 26 percent. The other currencies that
depend on Russian market shifts begin to suffer as well. The values of Uzbek sum and
Kazakhstani tenge show a fall correspondingly to the changes in Russian and international
markets. Given that the effects of COVID-19 disease and oil price war between Russia and Saudi
Arabia are impossible to immediately eliminate for now, there will be further pressure on USD to
strengthen in the short term.
Moreover, the issue of the large capital outflows involves a dramatic decline in foreign direct
investment into the economies and entire global investment. China, being one of the largest
investors in the developing and transition economies, has been forced to focus more on
stabilization of its economy and lessening the negative impacts of COVID-19 rather than invest
in the projects in other countries. To be more precise, most of the Chinese investment has been
devoted to the projects within the Belt and Road Initiative during the recent decade. However,
due to the coronavirus pandemic, these outflows have been diminished and, as a result, transition
economies, mostly dependent on Chinese investments, are experiencing huge capital outflows
and investment shortage. According to some global analyses, foreign direct investment is
forecast to demonstrate a downward trend of up to -40% within 2020-21 among the largest
multinational enterprises (UNCTAD, 2020). At the current point, СOVID- 19 is already
estimated to generate a loss of 500 billion USD in foreign investment around the world
(Rodriguez Chiffelle and Vanham, 2020).
ISSN: 2278-4853 Vol 9, Issue 6, June, 2020 Impact Factor: SJIF 2020 = 6.882
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