Noah Wilbur | Opinions Editor
From thousands of business closures and record-breaking unemployment, to a historic nosedive in the financial markets and trillions in economic stimulus, the overwhelming evidence clearly confirms our worst fears that the pandemic has indeed wreaked havoc on our globalized economy.
This unfortunate reality is attributable to the worldwide lockdowns and social restrictions forcing businesses to close their doors, with consumers unable to spend money at major retailers, local restaurants and mom-and-pop shops. Emerging and developed economies have both struggled since then to deal with an unprecedented collapse in consumer demand and capital investment.
For example, in 2020, countries around the world experienced record-breaking contractions in GDP due to the government-mandated lockdowns. Even with global output expected to rebound by 4% in 2021, financial analysts and economists still project it to remain well below pre-pandemic projections for the foreseeable future.
International trade was also adversely impacted as countries were forced to either halt or considerably scale back exports and imports for nearly two months. In its Global Trade Outlook report from February, data analytics firm HIS Markit estimated that global trade contracted by 11.2% year-over-year in 2020, with a significant portion of gains achieved over the last decade eliminated.
Most importantly, the coronavirus set in motion a slowly unfolding international jobs crisis by exacerbating unemployment in countries across the globe. According to the Organisation for Economic Co-operation and Development, COVID-19’s immediate impact on the global labor markets was nearly 10 times worse compared to the short-term effects of the 2008 financial crisis. With the global workforce now exposed to short-term vulnerability, the recent downward trend of unemployment rates can reverse at seemingly any moment if economic conditions once again turn sour.
With an unprecedented plunge in global GDP, considerable disruptions to international trade and a rapid surge in unemployment, it is safe to say that our international economy was ill-prepared for a pandemic of this magnitude.
Despite the gloomy picture the above evidence undeniably paints, this information still fails to accurately present the true consequences of COVID-19 on the worldwide economy.
Regardless of a quick recovery, the pandemic is still headed down the path of reversing all progress made within the last 30 years in resolving the global poverty crisis and reducing inequality. According to The World Bank, poverty is expected to increase by 119 million people in 2020 — the first significant increase in more than 20 years. What’s more, COVID-induced poverty is projected to further rise by more than 140 million in 2021.
Put simply, the immense effort and capital put forth by governments, businesses, non-profits and everyday people to increase international living standards and equality is soon to be eradicated. An unmistakable indication that the pandemic will have a greater impact on impoverished and destitute countries capable of lasting for generations.
In light of the above evidence, it is clear that the pandemic has damaged the global economy on a scale not seen since the Great Depression. Be that as it may, the lasting impact of COVID-19 on the global economy is still very unclear — to say the least.
Even with economies slowly reigniting, the truth of the matter is that countless unknowns still exist as researchers, economists and financial analysts continue to struggle to provide a future outlook that isn’t riddled with extreme uncertainty.
As questions arise over whether or not pandemic-induced changes in consumer behavior will be enduring themes coupled with the emergence of new coronavirus variants, national and local officials across the globe must be particularly cautious and sensible with future policy to guide us along this windy path to a full recovery. The future truly hangs in the balance.