How has COVID-19 affected the global economy?

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The pandemic has stretched on for more than 12-months now. It has touched almost every nation and has certainly affected global trade. As governments are still struggling with lockdowns and vaccination rollouts; battling with the shift in trade agreements as the UK separates from the EU; and nations using their soft power to form alliances and pressure nations for what they want, the shifts in the global economy are evident. But do they still point towards the much-feared global depression suspected at the declaration of the pandemic?

Let’s take a look at some of the data gathered so far.

Global Stock Market 

The stock market saw major shocks in the first quarter of 2020, with the FTSE, Dow Jones Industrial Average and the Nikkei all falling as the WHO declared a pandemic and numbers rose.

An announcement in November that a vaccine would be available saw major Asian and US stock markets recover, but the FTSE is still in negative territory.

The FTSE dropped 14.3% in 2020, its worst performance since the global financial crisis of 2008.

Market volatility looks set to continue this year. As vaccine programs in many regions are struggling to reach targets and stock market confidence remains low, any stability is likely short-lived.

Job Seekers

Unemployment and underemployment have increased across major economies. This has meant that many nations have had to provide emergency assistance and bolster social welfare spending.

The number of job opportunities in many nations has also shrunk as the hospitality and tourism sectors buckle under the pressure of lengthy lockdowns and global uncertainty.

Some experts have predicted that it could be years before employment levels return to those seen before the pandemic.

 

Recession

Economic growth is measured by evaluating the percentage change in GDP, or the value of goods and services produced, over three months or a year. Economic growth generally influences wealth and job creation.

The global economy is estimated to have shrunk by 4.4% in 2020, according to the IMF, which described the decline as the worst since the Great Depression of the 1930s.

The only major economy to grow in 2020 was China, registering a growth of 2.3%.

Recovery in larger, services-reliant, economies like Italy and the UK that have been hard hit by the pandemic and recovery is expected to be slow.

Tourism will be slow to restart

The travel industry has been crippled. Airlines are in administration, leisure and business trips have been cancelled and tourism operators are in limbo.

While some regions looked to reopen at the beginning of 2021, new variants of the coronavirus forced lockdowns to be reinstated in many nations.

The aviation sector is one of the hardest hit by the pandemic, and for many operators, the strain might force them into administration or closure.

 

Hospitality sector

The hospitality sector has cut millions of jobs and many companies worldwide have declared bankruptcy. This has had a major impact on economies that rely on tourism and international business as part of their core economy.

 

Analysts predict that international travel and tourism won’t return to pre-pandemic levels until around 2025.

Retail

The retail sector has seen a major shift. Lockdowns have forced people to shop online, while stores have had to limit their numbers and restrict customer movements in-store.

A recent survey found that 67% of respondents were unwilling to travel more than 5km from home to go shopping. This change in shopping behaviour has boosted eCommerce, with global revenue of US$3.9 trillion last year.

Pharmaceutical companies 

The three major vaccine distributors are making lucrative deals with governments to secure  Covid-19 vaccine and treatment options. As a result, shares in some pharmaceutical companies have skyrocketed, while for others there has been a decline.

The high cost of production and management of Covid-19 vaccines and the growing number of same-size competitors have reduced investors’ trust.

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