COVID-19: A Guide to the Global Economic Impact
How Has COVID-19 Affected The Nations And The Global GDP?
The world continues to be brimming under the ghastly effects of COVID-19. As per the World Health Organization (WHO) status at 6:03 pm CEST, 30 July 2020, there have been 16,812,763 confirmed cases of COVID-19, including 662,095 deaths. It seems like a nightmare that doesn’t seem to end. Till a cure is found, coronavirus will continue impacting the world with a negative strike. Massive lockdowns, industries shutdowns, standstill businesses have inflicted substantial damage to the economy and GDP. Global leaders fear that we are already caught up in a recession that shall surpass the Great Depression of the previous century and global meltdown of 2008. The only thing expert are sure about the current global economic outlook is that it is hard to predict where the trajectory will point to and how long before the recovery phase kicks in. According to the IMF, the global economy is expected to shrink by over 4.9% in 2020. The gig economy continues to suffer.
In a survey by AppJobs carried in March, around 70 percent of gig workers then had no income, while 89 percent were looking for a new income source. In the stock markets sector, the FTSE, Dow Jones Industrial Average, and the Nikkei all saw massive falls as COVID-19 cases piled up. Last month, BBC reported that the Dow and the FTSE saw their biggest quarterly drops in the first three months of the year since 1987. To mitigate this, central banks around the globe slashed their interest rates to boost the economy by making borrowing cheaper and encouraging spending. While the pandemic gave a push to the healthcare, gaming, OTT industry, revenue in tourism and hospitality is beyond worse. However, experts also predict that if COVID-19 fades in the later months of 2020, countries like India and China can thrust global growth to 5.8% next year.
The magnitude of loss and recovery differs from research to research and firm by firm. For instance, OECD’s June Economic Outlook presents a pessimistic view. According to it, global economic output is set to fall by 6% this year, while the second wave of infections in 2020 could see a drop of 7.6%. In contrast, KPMG presents an optimistic front, citing a 7.9% decline in global GDP in Q2 2020, with a quick rebound of 7.5% in Q3 and 2.8% in Q4. Thus the overall 4.1% will be output in this year before accelerating by 6.6% in 2021. In Asia, when the coronavirus first reared its ugly head in China, the national GDP dropped by 36.6% in the Q1 of 2020, while South Korea’s fell by 5.5%. In Europe, the GDPs of France, Spain, and Italy fell by 21.3%, 19.2%, and 17.5%, respectively. KPMG states that China will be a primary leader in the path to recovery. At the same time, strong economic rebounds can be expected from Eastern Europe, Latin America, and the remainder of East Asia by Q3 2020.
But, the predictions of the research firm is based on the assumption that COVID-19 is a supply-side shock. If one has to consider the possible adverse scenario, i.e., the second wave of coronavirus pandemic, affected nations may require implementing another and more strict lockdown. This can throw our economy on a further deteriorating curve. Then the statistics figures will differ accordingly. The decline in Q2 will be 8.2%, with a smaller uplift of 5.9% in Q3 and 2.8% in Q4. The graph will be in the ‘W’ shape then. And the GDP forecast for this case is 7.9% in 2020 and recovering by 4.6% in 2021 and 3.0% in 2022.
KPMG warns that it is also important to note that ‘recover’ and ‘rebound’ state, does not necessarily refer to pre-pandemic levels. In fact, it could take until the latter half of 2021 to return to 2019-Q4 levels. Apart from that, some countries and territories may fare worse than others. The economic fallout could be in double-digit with recoveries to 2019-Q4 levels not expected until 2024 or later.