The Business Research Department of the Export-Import Bank of Thailand (EXIM BANK) reports that COVID-19... with 5 'Most' Events is a Historic Event. Over the past three months, COVID-19 has spread rapidly around the world, resulting in over 800,000 confirmed cases and more than 40,000 deaths to date. This situation has led to a global economic outlook for this year trending towards recession for the first time in over a decade.

At the same time, it has triggered 5 significant events that have shaken the global economy and financial markets like never before. Each event can be explained through the acronym 'C-O-V-I-D' as follows:

  • Circuit Breaker (CB) - The most widely used temporary trading suspension measures compared to all past crises. Since the beginning of the year when COVID-19 began to spread, global stock markets have plummeted by more than 30%, prompting many countries to implement CB measures more than ever before. For instance, the U.S. stock market had to use CB four times within just two weeks in mid-March 2020, more than during the Hamburger crisis, which only saw it used twice. Similarly, the Thai stock market also implemented CB three times during the same period, the highest ever recorded, reflecting a severe decline in global investor confidence.
  • Oil Price - The steepest drop in oil prices since the beginning of the year, crude oil prices have fallen by over 60%, the most and fastest in history, due to factors affecting both demand and supply. Oil demand has been pressured by a global economic contraction due to COVID-19, compounded by increased oil supply following a price war between Saudi Arabia and Russia, marking another major price war in the global oil industry. Extreme predictions suggest oil prices could drop to as low as $10 per barrel, indicating that this oil price crisis may be more severe than any previous instances, inevitably impacting the prices of other commodities.
  • Volatility - The highest volatility On March 16, the Volatility Index (VIX Index) in the stock market, which is commonly used as a measure of investor fear, surged to 82.69 points, the highest ever recorded since the index was first established in 1933, surpassing the Hamburger crisis peak of 80.86 points. At the same time, the Dollar Index, which reflects demand for the U.S. dollar as a safe-haven asset, soared to its highest level in four years within two days (March 17-19, 2020) as investors sold off all types of assets including stocks, bonds, and gold to hold cash. This reflects the fear and volatility in the financial markets, which is more intense than in many past crises.
  • Interest Rate - The lowest interest rates The severe contraction of global economic activity due to COVID-19 has led many central banks to adopt expansive monetary policies. This includes lowering policy interest rates to historic lows in the U.S., UK, Australia, and Thailand. Meanwhile, many countries, especially the U.S. and Europe, have implemented massive Quantitative Easing (QE) measures, surpassing those during the Hamburger crisis. This represents the largest liquidity injection ever, raising questions about whether these measures will be effective like in past crises and what problems they may leave behind, especially in countries already facing financial issues and high debt levels.
  • Double Shock - Simultaneous demand and supply shocks Previous economic crises, whether the Tom Yum Kung crisis or the Hamburger crisis, often stemmed from financial sector issues that escalated to impact the economy, primarily affecting demand (Demand Shock). However, the COVID-19 outbreak this time has not only impacted demand due to the economic slowdown but has also severely affected supply (Supply Shock) as businesses, shops, and factories have had to halt operations widely, potentially leading to business closures. This Double Shock may result in a widespread Domino Effect and be more challenging to resolve than many past crises.

From the above events, it is evident that we are in an economic crisis that may be more severe and prolonged than ever before, amidst an environment filled with uncertainty and volatility. Therefore, entrepreneurs, especially exporters, need to stay alert and prepare to manage risks that may arise in all dimensions, whether it be reducing costs, managing liquidity effectively, or utilizing risk management tools efficiently to await opportunities for recovery after the crisis has passed.