As the largest growth centres of the world economy like China, European Union and USA, which together contributed about 60% of world growth during 2010-19, has got severely hit by the novel coronavirus COVID-19. OECD observed that already 3.4 trillion USD worth loss happened in the world economy. what could be impacts in terms of employment, trade, income, etc? How the economies of the world can regain the strength? what could be the impact to major developing and under developed countries? Is there any meaning that the world countries still go for achieving higher and higher growth rates? Let us discuss.
Time has come to rewrite the economic growth models and its assumptions. The value of constant term (generally give less importance) in the economic models now influences a lot in the interpretation of existing economic theories. Because of that, no one can say now that how much impact the novel corona virus could impact the different economies. Reserve Bank of India in its latest monetary policy observed and cautioned that the situation is unprecedented and they never come across such kind of economic situation. They said the economic growth become unpredictable by using any existing models. Same observation has made by Fed Reserve as well as Bank of England.
The crisis will have strong effect on the global economy, however market driven economies will suffer more than centralized economy. One good thing will happen that after the virus effect gone may be after one year, all the economies will rejuvenate and grow much faster. @ Shaijumon C S
United Nations Secretary-General Antonio Guterres warns global recession due to coronavirus 'a near certainty' (March 19, 2020).
The world witnessed several casualties in Iraq. The injuries were concentrated in Kurdistan, Najaf, Basra, and Baghdad, Karbala, while the lowest injuries were in Mosul, Al-Akhbar, and Salah al-Din. Eating immune food was thought to be effective in preventing the effect, and the areas that made the TB vaccination were less infected with the virus
Situation is going towards global recession, if virus infections continuous for months, this may create mass level unemployment, and there might be depression like situation, which nobody can predict which country will suffer more and how long.........tough situation for policy makers. This is the time , each country must take timely and effective steps....otherwise no one can say,,, what will happen.
This epidemic will affect the structure of the economic situation of all countries in the world, especially countries that are among the pioneers of capitalist theories as USA , UK and so on
The pandemic and economic downturn include the following:
1. There is an extremely wide range of possible outcomes, resulting in a particularly high degree of uncertainty about the ultimate trajectory of the pandemic and the path and time needed for a return to a “steady state.”
2. The associated economic impact of the pandemic is highly dependent on variables that are difficult to predict. Examples include the degree to which governments prohibit business and personal activities, the associated level of compliance by citizens, the degree to which “flattening the curve” is successful, and the nature and effectiveness of government assistance.
3. Each entity must then translate the effect of those macro conditions into estimates of its own future cash flows.
The global economy could shrink by up to 1 per cent in 2020 due to the coronavirus pandemic, a reversal from the previous forecast of 2.5 per cent growth, the UN has said, warning that it may contract even further if restrictions on the economic activities are extended without adequate fiscal responses.
The Reserve Bank of India (RBI) on Thursday said the global economy is expected to tip into recession in 2020 as the covid-19 pandemic wrecks havoc on global production, supply chains, trade and tourism.
While India’s growth outlook remains grim, in a respite of sorts the risks the inflation projection are seen balanced, said the central bank in its bi-annual monetary policy report.
"The global economy is expected to slump into recession in 2020, as post-covid projections indicate. The sharp reduction in international crude oil prices, if sustained, could improve the country’s terms of trade, but the gain from this channel is not expected to offset the drag from the shutdown and loss of external demand,"
The Economic Impact of COVID-19 on Developing Countries
http://www.ipsnews.net/2020/04/economic-impact-covid-19-developing-countries-part-2/
In the first World Economic Outlook report since the COVID-19 coronavirus pandemic began, the IMF estimated Tuesday that the global GDP will shrink 3 percent this year, far beyond the 0.1 percent contraction in 2009 amid the financial crisis. Like many other forecasters, though, the IMF thinks there will be a significant rebound in 2021, pegging its prediction at 5.8 percent. The U.S., meanwhile, is expected to see its GDP fall by nearly 6 percent, and then jump back up by 4.7.
https://theweek.com/speedreads/908655/imf-estimates-global-gdp-shrink-by-3-percent-dwarfing-01-percent-financial-crisis-contraction
According to OECD report March 2020, projections for annual global GDP growth for 2020 have dropped by half a percentage point to 2.4% due to the coronavirus outbreak. However, a longer lasting and more intensive coronavirus outbreak could slow global growth to 1.5%. The report underlines the importance for governments to act swiftly and decisively to overcome the coronavirus and its economic impact.
According to the first chapter of the “World Economic Outlook” (IMF, April 14):
“As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support… It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically. A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely. This would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment”.
https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020
Economic growth will be slow down, and unemployment, inflation, poverty and food insecurity will be increased globally.
No doubt, the global economy (in terms of major economic indicators including GDP, Trade, inflation, employment, etc) shall suffer greatly as it is projected by many prestigious institutions like IMF, OECD, etc etc. On the empirical side, we may use the available quarterly data to observe the patterns, and project the future. However, I have gone through a recent article on the impact of COVID 19 on stock markets of the world, which witness a negative impact (remember the econometrics is possible for daily data, which may not for macro-level indicators right now).
Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 100326.
Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: cases or fatalities?. Research in International Business and Finance, 101249.
Yet, a short theoretical article in Research Finance Letters by Editor in Chief of RIBAF unfolds many interesting future questions to be answered. I believe targeting those will be interesting for policy inputs in related domains.
I enjoyed going through very useful comments from respected community members.
Muhammad Asif Khan , I believe that the world will develop hard immunity against health, financial and economic pandemics for herself.
The COVID-19 pandemic has pushed the global economy into a recession. With unemployment due to lock downs, shutting down of business and ceasing or decrease in economic activities are obvious. According to IMF, the global economy is expected to shrink over 3% in 2020.
Please see this Link:
https://www.icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx
My perception is that this is pushing the things to go online which were not online before. We have continuously saw an effort of the control of money becoming digital (bit coins etc). but still a lot of countries fall behind in this digital transactions. This epidemic may make sure that all go online. which may serve the purpose towards the "One Global Economy"
Dear Shaijumon C S
The effect of the COVID-19 in terms of loss of human lives is priceless, but its impacts on the global economy and sustainable development scenarios are also disturbing. For instance, the IMF predicts that the world will enter into a recession worst than the Great Depression of 1930, with a preliminary estimation of the economic impact of the crisis at US$ 2 trillion.
One of the suggested solutions is based on the idea of the green recovery that could enhance the implementation of the SDGs to end poverty, protect our planet and ensure prosperity, rather than return to the former social patterns that would let us more vulnerable to future crises.
I would like to invite the participants to access on ResearchGate my latest publication about this topic:
Book Post-COVID-19 Rebuilding Our Paradigms Through Sustainable D...
Kind regards,
Ernani Contipelli
The scale of the global economy recession throughout 2020 turned out to be much lower than the original forecasts of a decline in economic activity that prevailed at the time of the announcement in March 2020 by the World Health Organization of the SARS-CoV-2 (Covid-19) coronavirus pandemic and the emergence of a deep stock market crash in stock exchanges.
Regards,
Dariusz Prokopowicz
Unfortunately, the negative and long-term effects will be devastating.
The long-term impact of COVID-19 on global economy will be immense and dreadful, and countries will be facing a hard time to regain their loss economy.
Good question Dr Shaijumon C S
I think that unfortunately, the countries that are poorer will suffer to a greater degree. As brought to attention in the question, the developing and under developed countries will probably feel the impact most.
Dear Mary C R Wilson,
Yes, yes, any major international and / or global economic or financial crisis led to an increase in income disparities and economic development between the most developed and least developed countries, and similarly on the microeconomic scale, i.e. increasing income stratification in societies. Unfortunately, the applied anti-crisis, interventionist socio-economic policy programs usually do not significantly reduce the scale of the above-mentioned stratification and differentiation in the scope of generated income.
Best regards,
Dariusz Prokopowicz
As per a paraphrase ‘When dominant countries like the U.S.A., China, Japan, Germany, France sneeze, rest of the world catch cold’ The above statement indicates the impact an event like a pandemic will have on developing and less developed economies. If the pandemic could have been contained to China only then we could expect a ‘V’ shaped recovery. But, this has impacted 188 countries in the world.
It's been over half a year since my previous answer. Much has changed during this time. Some national economies are already efficiently recovering from the economic crisis caused by the SARS-CoV-2 (Covid-19) coronavirus pandemic and entering the path of an accelerated, post-crisis pro-economic boom, accelerated economic growth, i.e. the path of a pro-growth wave of the business cycle. However, due to the large-scale use of public aid, implemented anti-crisis financial support programs for enterprises, and high additional amounts of money introduced into the economy for several months, inflation began to increase significantly. There is a risk of inflation getting out of control. As a result, central banks began to raise interest rates.
Regards,
Dariusz Prokopowicz
As long as the impacts of COVID-19 have been existed, so the first impact is the nation debts which are increased rapidly, also the consumer habbits that have been rely on the e markets. Moreover, the percentage changes in the GDP and tge global supply chain.
Unfortunately, the negative and long-term effects will be devastating.