Modeling the Effect of Coronavirus on the Global Economy

Introduction

COVID-19, a global epidemic that began in China's Wuhan area in the year 2020, has spread throughout the world. This virus spread quickly over the globe due to physical human contact and activities like coughing, sneezing, and the propagation of droplet infections. The virus not only wreaked havoc on people, but also on the economy. Halting of production of goods and services hit many sectors, resulting in a sharp drop in nations’ gross domestic product as well as export and import rates (Gurumurthy, K., Priya, A.J. and Don, K.R., 2021). COVID-19 was declared a pandemic by the World Health Organization (WHO), and it has impacted the world economy to the tune of $90 trillion (Gorain, B. et al. 2020).

Governments throughout the world implemented non-pharmaceutical measures such as social distance and lockdown to prevent and manage the spread of coronavirus. These measures, which were implemented with varied degrees of thoroughness, are responsible for significant social and economic effects on the society (Asahi, K. et al. 2021). For example, lockdowns prohibited activities including, schools, businesses, works, sports, and travel so as to limit the spread of Convid’19. These led to increase in unemployment, causing most businesses across the globe to abruptly close (Verma, P. et al. 2021).

Gorain, B. et al. (2020) argued that there was limited cooperation across countries in the early stages of the COVID-19 outbreak. Following the G-7 emergency meeting, member countries pledged to fight the pandemic by coordinated research, fiscal measures, and availability of medical facilities. However, the G-20, which has a larger membership, has gained traction on debt relief for low-income nations in response to the global financial crisis (Gorain, B. et al. 2020). According to Roubini, N. (2020), Covid-19 created a global economic shock that was more severe and faster than the 2008 global economic crisis and the Great Depression. He went on to argue that for each of these two cases, for about three years; credit markets were stagnant, unemployment rates increased, stock markets fell by more than 50%, bankruptcies occurred, and the fall in GDP was more than 10% annually. However, in the case of Covid’19, all of these effects of global economic shock played out in about three weeks.

The United Nations system's national accounts standardized gross domestic product as an economic indicator which measures a country's total output of final products and services over a certain period of time (Verma, P. et al. 2021). It is not only used to compare and evaluate countries' living standards, development, and social welfare, but also to assess their economic performance. This project is geared towards using gross domestic product as an economic indicator in modelling the effect of the Convid’19 pandemic on the global economy. This is paramount as it will make us to better understand the effect of coronavirus on the global economy. Knowledge of the effect of a pandemic on the global economy will thus, make us to be better prepare economically against a pandemic.

Problem Statement

Declared a global pandemic by the World Health Organization (WHO), Convid’19 has resulted in a dip in the world economy (Gorain, B. et al. 2020). Governments around the world in a bid to limit the spread of Convid’19, enforced social distancing, wearing of face mask, lockdown and travel bans. However, lockdown and travel bans majorly halted education, production, sport, entertainment, and forced business to close and lay off some workers (Verma, P. et al. 2021). These affected global economy thereby the gross domestic product of countries, and also led to increase in unemployment and even suicide (Kawohl, W. and Nordt, C., 2020).

Aim and Objectives

The aim of this project is to explore, model and evaluate the effect of Convid’19 on global economy. The objectives of this research work are as follows:

1. To better understand and gain insight into the effect of Convid’19 on the global economy in 2020.
2. To machine learning to model the relationship between Convid’19 and the global economy in 2020
3. To report findings and any significant relationship between Convid’19 and global economy.
4. To proffer solutions to how the world can be economically prepared for any global pandemic.

Research Questions

The research questions for this project are as follows:

1. How did Convid’19 affect the global economy in 2020?
2. Can a machine learning model be used to explain the relationship between Convid’19 and the global economy so as to better be prepared economically for any future pandemic?

Deliverables

The deliverables of this project are exploratory data analysis, data mining, data munging, modeling, evaluation, and project report. The report should thoroughly explain the source of the data used, exploratory data analysis, code implementation, feature selection, model selection as well as model performance.

Relevance

This project is mainly focused on using machine learning to explain the effect of coronavirus on the global economy.

Methodology

This project would consider a secondary research, modeling, and deployment. They are further buttressed as shown below:

Secondary research

The secondary research in this project will utilize a systematic approach (Johnson et al., 2016) to review the works of literature. The steps involved in the systematic review of the literature are provided below:

• Step 1: Identify the research questions that can be used for the project.
• Step 2: Identify the keywords that should be used to research the works of literature.
• Step 3: Extract the journals and books that are appropriate for this project.
• Step 4: Write the literature review chapter.

Modeling

This section involves sourcing for and making sense out of data. The steps involved are as follows:

• Data collection
• Data Munging
• Exploratory Data Analysis
• Model
• Model selection
• Model evaluation
• Interpretation of result

Evaluation

The risk assessment conducted for this project is provided in the table below:

Table 1:  Risk assessment