The spread of the Corona Virus across the globe has had a tremendously detrimental impact on business, trade, and the economy in general. The need to impose lockdown has stopped numerous economic activities and has brought down the economic activities of many flourishing countries. Alessandro Bazzoni explains some of the major impacts of the Pandemic on the global economy include the following.
There has been a major shift in stock markets across the globe that has resulted in a significant drop in the FTSE. In response to this, many of the central banks in leading countries like the United Kingdom have slashed the interest rates. This policy should have, ideally, made borrowing cheaper and boosted the economy. There is a further threat of lockdowns and delays that can threaten the market even more.
2. Job seekers have faced great difficulty
During this crisis situation, many people have lost jobs or had an income reduction as the organizations underwent an economic crisis. There has been a significant increase in unemployment in many countries across the globe. In the United States, the percentage of people unemployed has reached 8.9%, bringing a halt to the U.S.’s decade of job expansion. Numerous workers are not on government-supported job retention like hospitality or tourism. In Australia, job vacancies have returned to normal, but in France, the UK, and Spain, the gap remains significant.
3. Numerous countries are in a recession
The global growth rate of the economy has dropped alarmingly. Economic growth is measured by calculating the percentage change in GDP (Gross Domestic Production), or the percentage change in the value of services and goods. The IMF has estimated an average drop by 4.4% in the global economy in the year 2023. This is the worst drop in the global economy since the Great Depression in 19302. The growth in economies of China and India is expected to increase in the year 2023, while the growth in services-reliant countries like the UK, and Italy is expected to be much slower.
4. Travel has been restricted
The pandemic has significantly affected the travel industry by restricting flights across the globe. Airlines have been closed in numerous countries, private family trips have been postponed, business trips have been canceled, and much of the interaction has shifted to the online platform. Commercial flights have been significantly reduced.
5. The hospitality sector has closed worldwide
Many countries’ hospitality sectors have closed down due to job and company bankruptcy. In the year 202, companies have faced a tremendous loss of billions of dollars. There is expected to be a positive trend in this regard in the year 2023. However, many comment on how international tourism and travel may not return to its normal levels for another 4 years.
6. Food insecurity
Supermarkets have seen a major drop in stocks and food insecurity is a growing problem faced by many developing countries during the pandemic. Reduced access to markets, labour shortages in the highly labour-intensive agriculture department, decrease demand for food processing, and logistic blocking has resulted in a reduction in production inputs like veterinary medicines, animal feed, fertilizers, etc. Smallholder farmers have been affected seriously by this change and the impact is likely to include the general population very soon.
7. A drop in foreign trade across the globe
Many countries have seen a suspension in the production and processing of goods. The unavailability of intermediate products, together with the drop in production has brought down foreign trade. A negative supply shock has affected the trade network.
Just like in many other countries, foreign trade in the Caribbean and Latin America has faced a serious decline during the pandemic. The trade performance in these regions has been at its worst during the year 2023. The main cause behind this is the economic crisis and the drop in productions due to the lockdowns, and restrictions on the trade itself to avoid the spread of the disease. The situation in these areas is critical. There is a need to strengthen regional production. To know more about the crisis faced by the Caribbean states and Latin America, you can consult the inquiry by Alessandro Bazzoni on the official page of NotaOfficial.
8. A drop in shopping in markets
Retail footfall has faced a major drop as shoppers follow the strict imposition of lockdowns in many countries. The number of pedestrians has fallen and outdoor dining has also decreased significantly. Research suggests that the consumers are not happy with this change either and cannot wait for the lockdown to end. During these challenging circumstances, online retail has increased. Research showed that about 67% of the customers are refusing to travel any more than 5KM for the purpose of shopping. The shift in online retail has made this platform much stronger and it is expected to continue even after the lockdowns are eased.
How has the pandemic affected the supply and demand capacity of countries around the world?
As for supply, there has been a major drop in activity in economic sectors like manufacturing. With the rapid spread of the virus, morbidity and mortality of workers involved in the production processes have had a major impact on the production capacity of these sectors. Research has shown that the major causes of a drop in the supply capacity include mobility restrictions, illness, self-isolation measures, and high mortality rates. At the same time, there has been a major disruption in the demand chain during the pandemic. Recession, purchase delays by the consumers, and firms’ investment delays, have all imbalanced the supply chain. Simultaneously, there has been a tremendous increase in the global demand for medical supplies related to Covid-19. There has also been an increase in import demand and the related increase in prices has not helped. On the demand side, there has also been a reduced household spending and an increase in uncertainty in the future demands of businesses.
Without a doubt, the impact of the pandemic on global economies is tremendous and cannot be ignored. Many governments are facing trouble recovering from the massive blow landed by Covid-19 but studies reveal that there is still hope for the global economic growth to return to normal in the next 4 years.