This year has seen global growth disrupted by the COVID-19 pandemic, with many of the world’s biggest economies in recession.
By 2019 and early 2020, the global economy stood at $88 trillion. After the pandemic hit, the global economic outlook has changed much, and not for the good. In fact, the outlook is bleak as most of the projections that showed upward growth now paint a dismal picture; only a few economies on top (China’s) will suffer the least from the virus’ outbreak; all others are doomed for a recessive year as financial activities across the world were earlier ground to a halt and even now are opening under extreme duress from governments worldwide.
Economical giants like the UK, Germany are still in doldrums over whether to shut down the whole infrastructure again or keep the wheels spinning and risk the pandemic going out of control. So far, the outlook is bleak but there is light at the end of this very dark tunnel. Well, that’s what everybody likes to believe.
World Economy Breakdown: the Covid Effect
And the recovery will take longer than economists first thought. In June, the International Monetary Fund’s (IMF) World Economic Outlook projected global growth at -4.9 percent in 2020, 1.9 percentage points below the April forecast.
Next year, the IMF projects global growth at 5.4 percent – 6.5 percentage points lower than the pre-COVID-19 projections of January 2020. The impact would be felt hardest on low-income households, said the IMF, and threatens to undo three decades of progress to reduce extreme poverty. While the economic impact of COVID-19 varies across the globe – depending on factors from economies’ efforts to contain it, level of development and types of industry, to the stimulus packages available – it’s useful to understand the global economic picture before the pandemic.
Only 16 economies had a GDP higher than $1 trillion, with the US by far the biggest economy at more than $21 trillion – making up just under a quarter of the global total of almost $88 trillion. China was the second largest at more than $14 trillion and Japan was in third place with just over $5 trillion. The top 10 economies combined made up two-thirds of GDP, while the 42 represented made up just over 90 per cent of the world’s GDP, and the rest of the world accounted for the remaining 9.8 per cent. Africa is the smallest region, with three economies – Nigeria, South Africa and Egypt – together making up $1.1 trillion of global GDP.
Needless to say, while the majority of the developing world was already under financial duress, the pandemic only exacerbated the effects and forced the economies to follow a stringent lockdown, which, whilst damaging, was still good for their own populace. This severely impeded the work of financial districts around the world; from NYSE to Japan’s Nikkei index, every major stock exchange stopped trading as economies took a dive. That resulted in the whole food chain getting jolted at once; from developed to underdeveloped nations, everyone felt the crunch and everyone waited to see what governments would do.
The governments did what they had to do. Aside from the bailout packages it routinely doles out to corporations, it now had the whole population to bail out from the jaws of poverty; the entire manpower now depended on the government to help them out financially, not the employers. While the governments have had a positive response so far, helping people out with financial incentives and packages, it is not enough; as is evident with the US’ $1200 one-time financial aid cheque for each individual. What is even more worrying is what’s in store for Americans later on; as is with other states, taxes will be levied to the full to compensate for what the governments had to go through for a good part of 2020.
But, as economists around the world agree on, the situation will persist for a couple of years before we rebound from the effects; at least till 2024, economies will show signs of stunted growth and will face difficulties in getting up and running. But, as the economy will start to rebound, the global economy’s sluggish outlook will persist, economists and financial gurus warn, because a good part of the global economy has been shaken to the core and will require time to stabilise and get back on track.
The winner however, will be China from all this. As economists agree worldwide, China has stuck with its aggressive economic growth policy and has stayed true to its projections of overtaking America as the global economy giant; it is poised to do so not before 2025 though.
You can learn more about this and read more like this at https://heymuse.com/, a great general news website that hosts more great content on the global economy.