The impact of the pandemic on the World Economy
Written by Ioanna Korkouti
The coronavirus pandemic has had serious consequences beyond the spread of the disease and efforts to isolate it. As the pandemic had spread across the globe, concerns had shifted from issues of food supply to the construction sector to the reduction of business activities. The global economy is at a turning point which is expected to play a key role in the later decade.
The disruption of the economy associated with the coronavirus pandemic is having broad and severe effects on the financial markets, including the equity, bond and commodity markets. With a post-hegemonic world and an unstable environment, the notion of inequality is bound to emerge reinforced. The poorest and the non-participants in the economy will see their incomes decline and lose their jobs.
According to the latest International Monetary Fund (IMF) projections, announced on 20/10/2020, the decline in global GDP was expected to be in the range of -4.4%, while for developed economies the corresponding decline is expected to be equal to -5.8%. The inequality between countries was increased and had depended on the amount of public debt that was created, due to dealing with the consequences of the pandemic that is afflicting the planet, and on the possibilities for refinancing. A period in which the great conflict between democracy and populism is under way.
The evidence pointed to a heavy price that the German economy had payed to halt the pandemic. During the first quarter of 2020 it contracted by 2.2% and the estimations for the full year came up to a 6.5% decline in German GDP. France, the second largest economy in the Eurozone in that time had already contracted by 5.8% in the first quarter of 2020, but the full year forecast was one of the most gloomy in the Eurozone as they even made it up to 11% recession. Italy was the country that was hit the worst in terms of deaths from the pandemic. It was a similar picture in the Italian economy, which has already contracted by 4.7% during the first quarter, so far Rome has had about 8% recession, but Fitch said that Italian GDP had shrunk by 13.7% in the end of 2020.
In the case of Greece, the government had announced an “aid-package” with the total of 23.9 billion euros (or around 14% of GDP), including loan guarantees financed by National and EU funds. In mid-November 2020, the final report of the state budget for 2021 was submitted to parliament, which projected a recession of -10.5% for 2020.
On the contrary, due to the depth of the recession in 2020, most international organisations predicted a significant recovery for 2021. In particular, the IMF had forecast GDP growth of 4.5% in the US, 6% in the Eurozone and 5.9% in emerging and developing economies. For the Global GDP the forecast was around 5.4% and for the Global Trade around 8%. For Europe and the US, this growth, was not even close to cover the GDP losses that were made in 2020. For the Global GDP, it was expected that by the end of the year 2021 it would have recovered for the year of 2019.
Overall, the global economy is currently operating in a historically unprecedented macroeconomic, fiscal, monetary and financial environment, with conflicting situations and trends.
Bibliography:
https://www.capital.gr/oikonomia/3472355/insete-megales-oi-epiptoseis-tis-pandimias-stin-pagkosmia-oikonomia
https://www.tovima.gr/2020/11/30/finance/analysi-oi-oikonomikes-epiptoseis-tis-pandimias-se-pagkosmio-eyropaiko-kai-ethniko-epipedo
https://tinyurl.com/3zpj9rmt (Wikipedia – Social and economic impact of pandemic COVID-19)
