Economic impacts of the Corona pandemic around the world

The Covid-19 pandemic has had a negative impact on the global economy. Current macroeconomic weaknesses make emerging markets and developing countries vulnerable to economic and financial turmoil, which may limit the ability and effectiveness of policy support when it is urgently needed.

The Covid-19 pandemic has had a negative impact on the fragile global economy.

Although the full impact of the epidemic on humans and the economy will not be evident for a while, the losses in these two areas will be huge.

Current macroeconomic weaknesses make emerging markets and developing countries vulnerable to economic and financial turmoil, which may limit the ability and effectiveness of policy support when it is urgently needed.

Even with policy support, the economic impact of the COVID-19 epidemic is expected to be long-term.

 

Large-scale closures

By early April, about 150 countries had closed all schools, cancelled rallies and events, and more than 80 countries closed all workplaces to curb the spread of the virus.

Travel restrictions are widely implemented.

Mandatory closures and automatic social divergence of consumers and producers have had a significant impact on global activity and trade, accompanied by volatility in financial markets and a sharp drop in oil and industrial metals prices.

 

Multiple weaknesses

In the short term, emerging and developing market economies that may be severely affected by the economy are those with weak health systems, rely heavily on trade, tourism, or foreign transfers, depend on commodity exports, or suffer from financial weakness.

On average, debt levels in emerging markets and developing economies are higher than they were before the global financial crisis, making them more vulnerable to financial pressures.

 

Long-term damage

Severe stagnation has a lasting impact on potential output by reducing investment and innovation, eroding the human capital of the unemployed, exiting global trade, and disrupting supply chains.

The long-term damage to the Corona epidemic will be very serious for economies suffering from the financial crisis and energy-exporting countries due to low oil prices.

On average, within five years of emerging market economies and developing countries, the recession associated with the financial crisis may cause potential output to fall by about 8%, and potential output to 11%.

 

Productivity rates affected

The epidemic is also expected to stifle weak productivity growth in the past decade.

Previous diseases were accompanied by a 6% reduction in employment productivity, and an investment rate of 11% after five years in the affected countries.

 

The new poor

In the past 12 months, the COV epidemic has infected the poorest and most disadvantaged people, leaving millions in poverty now.

After decades of steady steps in reducing the number of poor people living on less than $1.90 a day, this year will be the first loss in a generation of extreme poverty.

Recent analysis warns that the epidemic has plunged 88 million people into extreme poverty this year, a preliminary study.

At worst, this figure is 115 million.

The World Bank Group expects a large proportion of the "new poor" in South Asia, followed by sub-Saharan Africa.

 

Economic activity decelerates

These restrictions, which are used to contain the spread of the virus and thus relieve pressure on poor and crowded health systems, have had a significant impact on economic growth.

Simply put, the June issue of the World Economic Outlook states that "this epidemic has caused an unprecedented global crisis - a global health crisis with massive human losses - that has led to the world's worst recession since World War II" and predicts a decline in the global economy and average per capita income this year, which will plunge millions into extreme poverty.

 

Money transfers decline as migrants and expatriates decline

Of particular concern are remittances sent by migrants to their countries of origin.

Over the past few decades, the role of these remittances in reducing poverty and promoting growth has become increasingly important.

Last year, these cash flows were equivalent to FDI and official development assistance (from one country to another).

However, the coronary virus epidemic has caused a major setback as our latest forecast concludes that remittances will decline by 14% by the end of 2021, a slightly better probability than previous estimates during the epidemic, which is not contrary to the fact that this is an unprecedented decline.

Remittances are expected to decline in all regions, with Europe and Central Asia experiencing the largest decline.

With this decline, the number of immigrants and expatriates is likely to decline as the number of new arrivals and migrants decreases and the number of returnees increases.

These reductions prevent many poor families from remaining in developing countries, where remittances from migrants and expatriates are vital to families around the world.

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Impacts on businesses and jobs

The closure of the country due to the Corona pandemic has had a serious impact on business and jobs.

Worldwide, SMEs in developing countries are under a lot of pressure because more than half of them do not pay their debts.

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