How Coronavirus and Other Pandemics Affect The World Economy
The pandemic which we have witnessed over the last 2 years has been an unprecedented world event which has altered the lives of millions around the globe. Stepping back from the important and tragic details around the loss of lives, jobs and the freedoms which we once knew, the world economy is a helpful way for us to assess just how this virus has impacted the world on the whole.
Given the impact which Covid-19 has had on the supply chain, logistics, labor, geopolitical instability, and even inflation, it is unsurprising that the world economy has been greatly affected, and here are some examples of that.
An interesting insight into some of the ways that the economy has been reshaped by the pandemic is found when we look at remittances received by nations around the world. Hundreds of thousands of migrant workers around the world rely on an international money transfer to send cash back to relatives in poorer nations. During the first year of the pandemic, this figure fell by 8% globally, largely due to a lack of income for migrant workers. As developed nations reopened we saw a huge boom in remittances, as they began to send back even more money to relatives in struggling countries. Mexico for example saw a 27% increase from 2020 to 2021, with remittance-reliant countries like India and China seeing increases of 3 and 3.9% respectively.
It should come as no surprise that stock markets plummeted during the first quarter of 2020, as the pandemic really took a grip on the world. If there is one thing the markets do not like it is uncertainty, and there was plenty of that to go around. The interesting aspect of 2020 with regards to stock prices however was the way that some topical stocks bounced back. Streaming services and food delivery were two leading sectors as the lockdowns were implemented around the world, and stock prices reflected that.
Unemployment is no good for a single country’s economy, let alone the global economy, but we have seen a huge rise in these figures across the world since the dawn of the pandemic. Leading the way are countries like Brazil and Italy, with rises of 10% and more. Coupled with this there are lower levels of new vacancies across the world, which is contributing towards the impacts of unemployment.
Value Shrink and Recessions
The most simplistic way to gauge the impact of the pandemic is to look at the shrinkage in the value of the world economy and take a look at the number of countries in a recession (negative GDP). In 2020 the only economy which grew was China, and we are now ins a situation where the majority of the world’s countries are in a recession. The IMF estimates that in 2020, the global economy shrunk by 4.4%, which is the worst that we have seen since the Great Depression of the 1930s.
This pandemic is a great yard stick for any other global crisis, and it is fair to say that it will take us a very long time to recover towards any kind of prosperity.