COVID-19 International

Economic Predictions Revised

From face-mask to lockdown, the response to COVID-19 has seen populations pitted against an invisible and deadly adversary and, in some cases, their own governments.

As regional inequality leads to inevitable disparities in COVID-19 outcomes, we take a moment to assess the latest developments in the global pandemic.

As of May 5, 2021, the recorded global tally for COVID-19 cases has passed 154 million, with 3.23 million deaths caused by the disease, according to official data.

India is experiencing a shocking spike in cases, and the effects of this latest surge underline the fundamental divergence between the wealthier parts of the world and the poorer.

The acute shortage of means to deal with patients in India has created devastating scenes along the lines of those witnessed in Northern Italy over a year ago and Brazil much more recently. With vaccination accepted as one of the key lines of defense, the race is on to ensure global rollout, with predictably different performance across the nations of the world.

As of May 1, 2021, over 1 billion doses of COVID-19 vaccine have been administered.

But the effects of COVID-19 on the world are not restricted to peoples’ health.

Unemployment has been a painful reality as global economies faced production halts in the face of slashed consumer demand, not to mention the widespread lockdowns implemented to reduce transmission of the disease.

In 2020 the global economy shrank by 3.3%. Governments have tried to mitigate this economic impact through interest rate incentives. The International Monetary Fund (IMF), taking into account the gradual reopening of countries that have managed to introduce vaccines successfully, has changed its GDP growth forecast.

The April World Economic Outlook report raised 2021 forecasts to 6%, up from 5.5% in the January edition. And for next year the IMF’s global growth forecast has also increased from 4.2% to 4.4%.

This optimism, such that it is, assumes a positive progression of the vaccination drive.

According to the report Developed Markets (DMs) can expect GDP growth of 5.1% for this year, up from 4.3%, while the 2022 forecast rose from 3.1% to 3.6%. The DM winners by these metrics for 2021 are the US and Spain, with estimated GDP growth of 6.4% apiece. These are followed by France (5.8%), the UK (5.3%) and Canada (5%).

The Emerging Markets (EMs), meanwhile, are respectively expected to at 6.7% and 5% for 2021 and 2022 compared to the previous forecasts of 6.3% and 5%.

The IMF’s leading lights were India, on 12.5%, and possibly now subject to revision, China on 8.4% and Turkey on 6%.

Notably, Turkey managed to emerge from 2020 on a GDP rise of 1.8% at USD717.1 billion, trailed by Mexico (5%), Russia (3.8%), Brazil (3.7%), South Africa (3.1%), Saudi Arabia (2.9%), and Nigeria (2.5%).

It’s worth noting that for 2020 Turkey and China were in a club of two among G20 nations to have printed a positive growth. The IMF sees global trade rising by 8.4% in 2021, having dipped by 8.5% last year, followed by a 6.5% climb in 2022, revised up from 6.3%.

Meanwhile, the IMF forecasts another bellwether of the global economy, oil prices, rising by 41.7% in 2021.

Underlining the obvious

The disparities of the global economic paradigm have been highlighted by the pandemic. Research confirms that in the wake of COVID-19, global poverty has increased for the first time since the 1998 Asian financial crisis. In a telling development, the global poverty rate – that had by 2018 slumped to 8.6% from 35.9% in 1990 – had risen to 8.8% in 2020.

The United Nations Conference on Trade and Development (UNCTAD) data goes as far as to state that the UN’s biggest gig, the Sustainable Development Agenda 2030, will fall short of glory without steps to address the gulf between DMs and EMs in terms of international trade.

This amounts to a wake-up call to improve social conditions across a great swathe of the world. A major part of this would be through greater green credentials in global production systems.

Moreover, restrictions on travel, when combined with lockdowns, have seriously dented two aspects of the economy in particular, namely tourism and micro, small, and medium-sized enterprises, the latter responsible for the employment of the majority of the global workforce.

While economic forecasts are in the ascendancy, the pandemic, a unique moment in the lives on anyone aged under 105, is very much still with us.

And its effects seem set to linger in the economic arena amid new demand dynamics and uneven vaccination rollout.

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