How Did the COVID-19 Pandemic Affect the Global Economy?

The beginning of the year 2020 brought something unexpected, and most certainly unwanted, something that had an impact on the humankind which reached a global scale – the SARS-CoV-2 virus, widely known simply as the Coronavirus. What started as a more or less localized epidemic in the province of Wuhan, China, quickly spread to cover the vast majority of the inhabited territory, including around 190 different countries during the spreading process! This process led to the WHO (World Health Organization) declaring the world health emergency situation back in January, only to rename it into a pandemic emergency situation shortly after.

Recapitulation

Our life suddenly changed for all the inhabitants of the planet Earth. More than 80 countries closed their borders and gave orders for various businesses and institutions, such as schools and universities. They also strongly recommend to all the citizens to remain quarantined in their homes and to go out only if necessary. And all this seems not so odd, given the fact that more than 3.2 billion people were infected with COVID-19 disease, which led to thousands of fatal incomes.

All these safety measures for fighting the Coronavirus brought the entire planet to a halt. The only business and operations that kept on going are those depending on the Internet, such as all forms of online gambling, which seems to have attracted a lot of new players interested in offline slots or American Roulette, Poker, or video slots. However, excluding such branches of the industry, the global economy was faced with a global crisis once more, but this time the threat was much bigger than the, for instance, the Great Crash back in 1929, which had a massive impact mostly on the United States soil, or the Global Financial Crisis, back in 2008.

COVID-19 & Economy

Starting its journey in the Far East, the SARS-CoV-2 virus quickly made itself a path towards Europe. Considering the number of both infected and diseased COVID-19 patients, Italy took first place, while it was the second country in the world, besides China, that experienced a massive virus outbreak.

However, economically speaking, entire Europe experienced pretty much similar damage, due to quarantine measures and business closures, as well as border and travel restrictions. Any merchandise shipment to another country was temporarily blocked or slowed down to a minimum. People stopped spending money on anything but groceries and essential products, which eventually resulted in thousands of people losing their jobs.

 

COVID19 & GDP

The overall SARS-CoV-2 impact on the global economy can briefly be overviewed if we look at some simple statistics used by economists worldwide, such as the Real GDP (gross domestic product) Growth.

Organizations that have a global impact on the economy, such as the OECD (Organization for Economic Co-operation and Development) and the IMF (International Monetary Fund) have published an analysis of the change in the Real GDP Growth percentage, comparing March 2020 and April 2020 projections.

For instance, March projections for the entire world’s Real GDP Growth in 2020 were 2.4%, only to fall to -3% in April projections. European area went from 0.8% down to -7.5%, with even the most powerful countries significantly stricken, such as Germany or France, which fell down from 0.3% to -7%, and from 0.9% down to -7.2% respectively. The United States of America followed the trend, sinking down from 1.9% to -5.9%, as well as Russia, which recorded a fall from 1.2% down to -5.5%.

G-7 & G-20

Initially, the effort displayed by the affected countries to coordinate a proper economic response to the COVID-19 pandemic has been more than uneven. This is predominantly a result of divided opinions over the adequate response, which resulted in a total unilateral, self-centred policy, which was shown in export restrictions of needed medicine and medical equipment imposed by some countries.

Such actions led to the first emergency meeting of the G-7 group, consisted of seven countries: the United Kingdom, Germany, France, Italy, Japan, Canada, and the United States of America. The meeting was held on March 3, and it didn’t bring up any special solutions. However, due to worsening of the COVID-19 situation, on March 16, an emergency teleconference summit of the G-7 group, which resulted in all member states to commit to doing whatever necessary to enhance close co-operation between the affected states as a global response to the ongoing pandemic. This response includes activities such as medical research, increased availability of required medical equipment, various fiscal and monetary measures, as well as well-defined actions for supporting companies and workers.

With the G-20 group, things were a bit more complicated. Since this group includes China, the relations between it and the United States were at start a difficulty for reaching the consensus. There were also problems with Trump’s administration imposing “America First” policy as a priority. Saudi Arabia, a chair state for the year 2020, also imposed certain self-centred policies which led to fluctuations in oil price, having tendencies to become a genuine price war.

International Help

Parallel with the ongoing situation considering G-7 and G-20 summits, international organizations such as multilateral development banks and the IMF have taken a course of actions in order to maintain financial stability and to minimize the consequences of COVID-19 global market stress. This was achieved through constant economic support in accordance with current resources that were at their disposal.

The End-Effect

However, since a part of such measures is the financial support through loans and credits, the end-effect of the pandemic still remains to be seen. The disruption in the economic activity provoked by the COVID-19 pandemic had a wide-scale effect on both private and public borrowers. And for those that don’t manage to cope with such effect, it will be significantly harder to repay all the loans in the end.

There are several major things contributing to such end-effect: a total stoppage in almost all economic branches, except for some online businesses, which led to a significant increase in unemployment, as well as to a decrease in assets owned by the banks, while large amounts of money are being spent on loans, making it difficult for them to extend new ones. Governments, on the other hand, mostly rely on loans granted by the IMF, which also has to consider how much resources it possesses, as well as to set terms about funding allocation, rescue funds, etc.

No doubt, the upcoming period will be hard. But maybe these hard times will bring the entire humanity closer together, while that would probably be the only way to overcome the global economic crisis of such extent.

 

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