Impact of the covid-19 Pandemic on the World Economy

Impact of the COVID-19 Pandemic on the World Economy

The COVID-19 pandemic has had far-reaching economic consequences beyond the spread of the disease itself and efforts to quarantine it. As the SARS-CoV-2 virus has spread around the globe, concerns have shifted from supply-side manufacturing issues to decreased business in the services sector. The pandemic caused the 2nd largest global recession in history, with more than a third of the global population at the time being placed on lockdown.

During the earlier stage of the pandemic, supply shortages were expected to affect a number of sectors due to panic buying, increased usage of goods to fight the pandemic, and disruption to factories and logistics in mainland China. There have been instances of price gouging. There have been widespread reports of shortages of pharmaceuticals, with many areas seeing panic buying and consequent shortages of food and other essential grocery items. The technology industry, in particular, has been warning about delays to shipments of electronic goods. Global stock markets fell on 24 February 2020 due to a significant rise in the number of COVID-19 cases outside mainland China. By 28 February 2020, stock markets worldwide realized their largest single-week declines since the financial crisis of 2007–2008. This culminated in the 2020 stock market crash.

Possible instability generated by an outbreak and associated behavioural changes could result in temporary food shortages, price spikes, and disruption to markets. Such price rises would be felt most by vulnerable populations who depend on markets for their food as well as those already depending on humanitarian assistance to maintain their livelihoods and food access. As observed in the 2007–2008 world food price crisis, the additional inflationary effect of protectionist policies through import tariffs and export bans could cause a significant increase in the number of people facing severe food insecurity worldwide.

Many fashion, sport, and technology events have been canceled or have changed to be online. While the monetary impact on the travel and trade industry is yet to be estimated, it is likely to be in the billions and increasing.

Amidst the recovery and containment, the world economic system is characterized as experiencing significant, broad uncertainty. Economic forecasts and consensus among macroeconomics experts show significant disagreement on the overall extent, long-term effects and projected recovery. Risk assessments and contingency plans therefore must be taken with a grain of salt, given that there is a wide divergence of opinion. The record-high energy prices were driven by a global surge in demand as the world quit the economic recession caused by COVID-19, particularly due to strong energy demand in Asia.

he initial outbreak of the pandemic in China coincided with the Chunyun, a major travel season associated with the Chinese New Year holiday. A number of events involving large crowds were cancelled by national and regional governments, including annual New Year festivals, with private companies also independently closing their shops and tourist attractions such as Hong Kong Disneyland and Shanghai Disneyland.^[22][23] Many Lunar New Year events and tourist attractions were closed to prevent mass gatherings, including the Forbidden City in Beijing and traditional temple fairs. In 24 of China's 31 provinces, municipalities and regions, authorities extended the New Year's holiday to 10 February, instructing most workplaces not to re-open until that date. These regions represented 80% of the country's GDP and 90% of exports. Hong Kong raised its infectious disease response level to the highest and declared an emergency, closing schools until March and cancelling its New Year celebrations.

The demand for personal protection equipment has risen 100-fold, according to WHO director-general Tedros Adhanom. This demand has led to an increase in prices of up to twenty times the normal price and also induced delays on the supply of medical items for four to six months.

he COVID-19 recession is an economic recession happening across the world economy in 2020 due to the COVID-19 pandemic. Global stock markets experienced their worst crash since 1987, and in the first three months of 2020 the G20 economies fell 3.4% year-on-year. Between April and June 2020, the International Labour Organization estimated that an equivalent of 400 million full-time jobs were lost across the world,^[37] and income earned by workers globally fell 10 percent in the first nine months of 2020, equivalent to a loss of over US$3.5 trillion. Cambridge University put the cost to the global economy at $82 trillion over five years. When the COVID-19 pandemic hit Europe, much of Europe's investment had been high, but it had unexpectedly slowed. In 2019, overall investment in the European Union increased by about 3% over the previous year, surpassing growth in real GDP.

Investment, like other economic activity, fell drastically as a direct result of lockdown restrictions. This effect was particularly noticeable in the second quarter of 2020, when investment decreased 19% year on year, as most limitations were relaxed by the summer. In 2019, firms already had an unfavorable assessment of the economic situation. Overall expectations for sector-specific business prospects, as well as the availability of internal and external funding, deteriorated in the course of 2020.

In the European Investment Bank Investment report 2020–21, 81% of the respondents cited uncertainty as the most severe obstacle to investment. 20% of EU companies anticipate a permanent loss in employment, indicating that a sizable proportion of firms are pessimistic about their capacity to “bounce back” once the COVID-19 crisis has passed.

As a result of the pandemic, half of European companies anticipate an increase in the usage of digital technologies in the future. The proportion is considerably greater among companies that have previously used digital technology.

The European Union's public debt is expected to exceed 95% of GDP by the end of 2021, a 15 percentage point rise since the pandemic began.

From the first to the second quarter of 2020, the EU government debt grew by 8.4 percentage points to 88% of GDP. According to the European Commission, debt to GDP reached 94% by the end of 2020. In autumn 2020, a second wave of infection and lockdowns aggravated the problem.

After one year of the COVID-19 crisis, corporate investment was expected to decline by at least 25%.

From 2019 to 2021, the government debt-to-GDP ratio was anticipated to rise from 79% to 95%.

The International Monetary Fund (IMF) and other organizations predicted that the European Union's GDP would contract by 6% to 8%, a drop unprecedented since the Great Depression.

The European Union's total real GDP fall was more than 11% compared to the first quarter of 2020, the biggest drop in a single quarter on record.

The reduction in GDP was caused by government attempts to restrict the virus's spread, and it varied greatly between Member States. It was weakest, on average, in Central and Eastern Europe, where real GDP decreased 9.7% in the second quarter compared to the first. It decreased by 11.5% in Western and Northern Europe, and by roughly 15% in Southern Europe. In comparison, real GDP in the United States fell by nearly 9% in the second quarter compared to the first quarter.

In the second quarter of 2020, disposable income per capita decreased dramatically, affecting consumer expenditure, particularly for lower-income families.

The impact of the COVID-19 varied greatly on the industry. Sectors that rely heavily on physical presence, including passenger transportation, the arts, entertainment, tourism, and hospitality, were impacted the worst, with declines of up to 30% in the second quarter of 2020 compared to the first quarter. Industries such as agriculture, banking, and real estate, declined by 3% or less during the same time span. During the global financial crisis, the distribution of economic effect across sectors was extremely varied, with EU manufacturing suffering the worst decrease - over 20% in the first quarter of 2009. The decrease in other sectors was relatively limited, at around or below 6%.

GDP per hour in the EU grew by 0.3 percent in the second quarter of 2020 compared to the same time in 2019, while GDP per employee decreased 11.5%.

In Western and Northern Europe, as well as Central and Eastern Europe, the unemployment rate climbed by roughly 0.5 percentage point. The rise was greater in Southern Europe (1.5 percentage points). The United States increased by 4 percentage points during the same period, reaching a high of 10 percentage points in April in 2021.

The European Union's general government debt grew by 8.5 percentage points of GDP from the first to second quarters of 2020, reaching 88%.

Nations, cities and other collectives with governance mechanisms worldwide have announced the development and implementation of programmes for guided economic recovery. Some economic recovery programmes include Next Generation EU and Pandemic Emergency Purchase Programme.

A study published in August 2020 concluded that the direct effect of the response to the pandemic on global warming will likely be negligible and that a well-designed economic recovery could avoid future warming of 0.3 °C by 2050. The study indicates that systemic change for "decarbonization" of humanity's economic structures is required for a substantial impact on global warming, which also has economic aspects.^[65][66] Beyond targeted financing of green projects or sectors, contemporary decision-making mechanisms also allow for excluding projects with substantial environmental, social, or climate risks from financial relief. Over 260 civil society organizations called on Chinese actors to ensure that COVID-19 related Belt and Road Initiative funding excludes such projects. In November 2020 the IMF said that governments and central banks had promised $19.5 trillion of support since the coronavirus began.

The pandemic has impacted the retail sector. Shopping centres around the world responded by reducing hours or closing down temporarily. As of 18 March 2020, the footfall to shopping centres fell by up to 30%, with significant impact in every continent. Additionally, product demand exceeded supply for many consumables, resulting in empty retail shelves. In Australia, the pandemic has provided a new opportunity for daigou shoppers to re-sell into the China market. "The virus crisis, while frightening, has a silver lining".

Some retailers have employed contactless home delivery or curbside pickup for items purchased through e-commerce sites. By April, retailers had started implementing "retail to go" models where consumers could pick up their orders. An estimated 40% of shoppers were shopping online and choosing to pick up in-store, a behavior that had suddenly doubled as compared to the previous year.

Small-scale farmers have been embracing digital technologies as a way to directly sell produce, and community-supported agriculture and direct-sell delivery systems are on the rise.

round the world, women generally earn less and save less, are the majority of single-parent households and disproportionately hold more insecure jobs in the informal economy or service sector with less access to social protections. This leaves them less able to absorb the economic shocks than men. For many families, school closures and social distancing measures have increased the unpaid care and domestic load of women at home, making them less able to take on or balance paid work. The situation is worse in developing economies, where a larger share of people are employed in the informal economy in which there are far fewer social protections for health insurance, paid sick leave and more. Although globally informal employment is a greater source of employment for men (63 per cent) than for women (58 per cent), in low and lower-middle income countries a higher proportion of women are in informal employment than men. In Sub-Saharan Africa, for example, around 92 per cent of employed women are in informal employment compared to 86 per cent of men. It is likely that the pandemic could result in a prolonged dip in women's incomes and labour force participation. The ILO estimates global unemployment to rise between 5.3 million ("low" scenario) and 24.7 million ("high" scenario) from a base level of 188 million in 2019 as a result of COVID-19's impact on global GDP growth. By comparison, global unemployment went up by 22 million during the Great Recession. Women informal workers, migrants, youth and the world's poorest, among other vulnerable groups, are more susceptible to lay-offs and job cuts. For example, UN Women survey results from Asia and the Pacific are showing that women are losing their livelihoods faster than men and have fewer alternatives to generate income. And, in the U.S., men's unemployment went up from 3.55 million in February to 11 million in April in 2020 while women's unemployment – which was lower than men's before the crisis – went up from 2.7 million to 11.5 million over the same period, according to the U.S. Bureau of Labor Statistics. The picture is even bleaker for young women and men aged 16–19, whose unemployment rate jumped from 11.5 per cent in February to 32.2 per cent in April. In Japan, women have been disproportionately hit by the Covid pandemic because sectors like retail and hospitality employ many women and have been heavily affected by the pandemic recession. According to the health ministry, the suicide rate among Japanese women rose 14.5% in 2020, while it fell by 1% among men.