The new crown epidemic has plunged the global economy into the worst recession in history. It is not clear when the economy will fully recover. Recently, the latest progress in vaccines has brought hope to the economic outlook. However, some economists said that the speed of vaccine promotion in developing countries may be slow, which will hinder economic activity from returning to pre-epidemic levels.
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– In addition, economists also said that even for developed countries, Europe’s re-imposed blockade measures to prevent the epidemic from worsening may hinder economic recovery.
Citi’s economists stated in a report in early December:
“The distribution of the vaccine is a booster, but it won’t be effective until 2022.”
Nevertheless, they still stated that the global economy will “significantly improve” in 2021, because “it is not difficult to be better than 2020.”
01 Economic activity drops sharply
The rapid spread of the new crown epidemic in 2020 has forced many countries to enter a months-long lockdown period. Economic activities have significantly slowed down, and the gross domestic product GDP has fallen to record lows.
The International Monetary Fund’s IMF forecast in the latest World Economic Outlook report that the global economy will contract by 4.4% this year, and the global economy will grow by 5.2% in 2021. In addition, the IMF said in October that the world economy has begun to recover, but the organization warned that the economy will go through a “long, uneven and uncertain” process to return to the level before the epidemic.
02 Travel is still restricted
One of the blockade measures adopted by countries around the world is the complete or partial closure of border entrances and exits, which has led to the suspension of many international travel.
However, according to the United Nations World Tourism Organization, as of November 1, more than 150 countries and regions have relaxed travel restrictions related to the new crown epidemic.
However, the World Tourism Organization stated that many restrictions still exist to limit the movement of people across borders, including the following:
1. The border is only open to tourists of specific nationalities or specific destinations;
2. Visitors must undergo a nucleic acid test before entering the country, and the result must be negative;
3. Visitors need to be isolated in an isolation place or self-isolate upon arrival.
03 Accelerated unemployment
Another serious consequence of the economic recession caused by the epidemic is the increase in global unemployment.
The Organization for Economic Cooperation and Development (OECD) stated that in some countries, the early impact of the epidemic on the labor market was “10 times greater than the impact in the first few months after the global financial crisis in 2008”.
The OECD stated in the report:
“The working class bears the brunt of the crisis. Low-wage workers are the key to ensuring that basic services can continue during the lockdown, and they are at high risk of being exposed to the virus at work. At the same time, they also suffer from greater unemployment or lower income. risk.”
04 Soaring government debt
In response to unemployment, the government has increased expenditures to protect employment and support workers. The IMF stated in October that the global government has taken measures to alleviate the economic impact of the epidemic totaling US$12 trillion.
The IMF said that such an astonishing level of expenditure has pushed global government debt to the highest level in history, but governments cannot withdraw financial aid measures prematurely. The IMF stated in the report:
“Because many workers are still unemployed and small businesses are still struggling, even with additional social assistance, 80 to 90 million people may still fall into extreme poverty due to the epidemic. Therefore, the government cancels this special It’s too early for financial support.”
05 Central Bank Intervention
Central banks of various countries have also reduced interest rates (interest rates in many countries have fallen to historically low levels) to support the economy, which will help governments manage debt. The Fed has lowered interest rates to a level close to zero and promised not to raise interest rates until the inflation rate of 2% is achieved.
At the same time, the central banks of various developed countries, including the Federal Reserve and the European Central Bank, have also purchased more assets and injected more funds into the financial system. More and more central banks in emerging countries have also taken this measure to support the economies that have been hit hard after the epidemic.
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