COVID-19 and the global economy: Is COVID-19 to be blamed for the worsening global economy?

COVID-19 is a global pandemic that was initially discovered in Wuhan, China, in 2019. Since then, the disease spread rapidly in various parts of the world and caused significant disruption to the global economy. It drained the economic resources in different countries due to the immense requirement for resources for containment, management, and protective measures. Developing countries suffered and are continuing to suffer more due to limited access to resources. Developing countries, on the other hand, extended their support to the developing countries through different monetary and fiscal measures. Recovery from the pandemic is anticipated to be unequal among countries, with those with lower income levels taking longer than the developed ones. In addition to raising global inflation, below are the various ways in which tha pandemic has affected the economy:

Unemployment

The pandemic resulted in massive job loss and layoffs of many employees in different countries. Many businesses had to close down because they could not implement the operational procedures, while others suffered from a fall in demand for their products and services in sectors such as tourism and hospitality. As a result, employees from such organizations lost their jobs, raising the unemployment rates and lowering the household income levels. Less money was available for individuals to spend and invest.

Economic recession

COVID-19 resulted in a global economic contraction in 2020. The contraction was caused by containment measures such as business closure, lockdown, and low consumer spending due to low economic activity levels. The situation also brought about a fall in GDP levels in many countries.

Disruption in the supply chain

Supply chains were disrupted globally, leading to material shortages and delays in producing other essential commodities. This negatively impacted the manufacturing sectors and further slowed the efforts to attain economic recovery.

A change in consumer behavior

Consumers adjusted their spending habits to align with the lockdown and other safety measures. Their focus shifted to online shopping, acquiring essential goods and remote services, and lowering their discretionary spending.

Increased borrowing and debt levels

Many countries resorted to borrowing substantially to fund their anticipated response procedures and measures. In many countries, this has been a threat to fiscal sustainability in the long term, affecting other economic aspects such as taxation, which has been on the rise in many countries.

Increased inequality

The pandemic widened the existing income inequalities. Marginalized countries and populations were more affected by the resulting vices, such as job losses and inability to access health and medical services.

Despite the different recovery efforts by various countries, COVID-19 left permanent scars in the world, manifesting in increased inequality, poverty, inflation, and mental health issues, which continue to reflect in the current deteriorating global economy. The economic impacts of COVID-19 have been evolving to different degrees in different countries and economies. Generally, the pandemic is directly associated with the currently worsening global economy.