The Covid-19 global pandemic emerged not only as a public health crisis but also severely affected the global economy and financial markets. The shock it created had a ripple affect across all sectors of the global economy, triggering consequences such as significant decline in global GDP, rise in global unemployment, disruption of supply chains, suspension of manufacturing and services industries and the decimation of Industries such as tourism and even transportation.
The high death rates generated a human resource vacuum, while the closure of businesses and factories reduced productivity and altered the demand for consumer goods, inducing a negative supply shock.
Most governments underestimated the contingency needed to respond to the pandemic and imposed economically suppressive lockdowns which produced unanticipated human and economic loss. Major economies today stand dominated by increased unemployment, dipping growth rates and trade imbalancesthat have led to unavoidable recessions.
According to a report released by Brookings Institute about the Social & Economic impact of COVID – 19 on June 8, 2021, the global economy has suffered a huge disruption. The current downturn has surpassed the level of recession post-World War II. Likewise, the World Economic Outlook report published in April 2021 stated that a downturn of 7 % has been registered by the global economy. This decline in growth has hit adversely in the poorest parts of the world.
The aftershocks of the harsh lockdowns have had a massive impact on the GDP growth trends and are likely going to be a long-term feature. While some observers predict a quick recovery of the global economy, the ground realities suggest to the contrary. The developing economies also do not show a promising upward projection of GDP growth and are anticipated to stay below the baseline of 2019 expectations.
The economy of developing countries is further burdened with health system challenges. For instance, India has faced substantial economic consequences and in years to come it will have to focus on improving its health system delivery. More so, the pandemic in general caused direct impacts on incomes due to high absenteeism at offices, an increase in poverty and premature deaths. The drop in manufacturing created a negative supply chain disruption and closure of factories. Apart from the production inequalities, the impact of the COVID 19 pandemic remained at heightened vulnerability for the countries without universal healthcare coverage. This inequality prevailed because of the higher income gap between the top twenty percent and the relative lower economic strata. For example, those in office jobs were more likely to be facilitated with the transition of suitable working hours under lockdown timings, while, the retail, conveyance, delivery and transport workers rigorously underwent a reduction in work hours because of governmental restrictions and the decrease in the demand of goods and services.
The travel and tourism industry has been the worst hit by the global pandemic. This sector is the third-largest contributor to global economic growth. For certain countries, tourism is the dominant industry and has been yielding above 20 per cent of economic growth. But during the pandemic, the tourism industry came to a halt affecting the livelihoods of millions. A report by UNWTO predicted a loss of around 910 billion to 1.2 trillion dollars in the export revenues of the tourism sector in 2020 alone.
Another big area of decline in economic prosperity is the influence on higher education in a multi-country analysis. The spending on higher education has declined as a part of the consumer spending contractions suffered due to the pandemic. Economic uncertainty has made families pull back from committing to affluent higher educational institutes. A slim fraction of society may however continue to afford these costs. This would further widen the economic gap between different classes. The majority of students have preferred online enrolments, which undermined the consumption of many stakeholders and on-campus markets. This can, however, be seen to be facilitating the technology industry. The digital transformation has now accelerated three times due to the pandemic. Social distance measures and stay at home precautions gave impetus to the growth of remote working culture and allied online services.
According to a Microsoft report, the company sees a growth of 2 years of burnout within a timeframe of 2 months. Learning from home, working from home, shopping, entertainment and healthcare has overall led to the hype in the demand for IT products and digitalization services. Very specifically, digitalized growth has had a revolutionary impact on the educational sector, which otherwise had faced a downturn. Surveys have further shown an increase in investment in IT and internet start-ups.
The data storage industry, which includes names like Amazon and NEXDC among others is experiencing an upturn due to a rapid shift to work from home across the global workspace. According to an IBISWorld report, this sector has shown a growth of 12. 7 per cent in one year as compared to the 11 per cent growth of the past five years.
The online food ordering platforms have earned themselves a lifetime engagement of digitized customers. Many food operations stood hesitant to experiment to vouch their credibility on an online platform are now operating with long term growth plans in every laptop and mobile phone.
While in general, the retail market had experienced a shock with customer base reducing the small fraction of the retail landscape has experienced a worthful resilience. Products like XBOX, DVDs and video games saw an increase in demand. The new recreational domains are sought after surviving the lockdown in absence of mainstream entertainment.
As the pandemic continues to unfold, the extent of its structural impact on the global economy is yet to be determined. It is however evident that in a globalised world with interconnected economies, communicable diseases such as COVID-19 have the potential to impose profound economic and financial costs on the global financial system. This merits a collective international response andinvestment in vaccine development and its equitable distribution. It also warrants proactive international actions to devise models ofeconomicstability, capable of withstanding unprecedented shocks whether systemic or engineered, which lies at the heart of global stability.
Emad Lone is a class 12 student. He can be reached at firstname.lastname@example.org.