As we all know, the infamous COVID-19 has killed many, precisely 7.01 million people. To say that COVID-19 had a big impact on the world and specific economies would be an understatement. It has left a massive footprint on the world, from dramatically exacerbating global poverty inequality, to opening a gate for e-commerce businesses to flourish.
Looking more closely at its impact on economies, it catalysed a worldwide recession, with global output falling sharply in 2020. At the end of 2020, output had decreased by 4% below its pre-pandemic trend. The global economy declined by 3.2%, the largest decline since the Great Depression in the 1930s. Lastly, global GDP fell by 3.4%. To say the least, these were not good times.
As the pandemic unfolded, it became clear that impacts were extremely severe in emerging economies, as well as worsening some preexisting conditions. Many households and firms were poorly prepared to tolerate an economic shock of that scale and duration. Some studies suggest that 50% of households in emerging and developing economies could not buy necessities for more than 3 months due to the fall in income levels. Furthermore, businesses could not sustain more than 55 days of expenses with cash reserves and households with prior debt levels struggled to pay it off once the pandemic had started.
Global poverty had increased for the first time in a generation, and disproportionate income losses exacerbated the existing inequalities in both emerging and advanced economies. According to a 2020 survey, temporary unemployment had passed 70% for all workers who had completed primary education. Similar patterns could be noticed among small firms and businesses. Larger firms were able to cover expenses for 65 days, compared to 59 days for medium-sized firms, and 53 days for small firms.
To counter such losses and upcoming threats, many governments implemented fiscal policies to address the economic fallout from the pandemic. For example, the USA started a stimulus package and relief program to support individuals and businesses. In contrast, fiscal policies were much smaller and delayed in emerging economies. Additionally, the pandemic placed pressure on emerging market economies, in turn constraining entrepreneurship, and highlighting the necessity of pre-finance programs.
In summary, COVID-19 has reshaped global economies, impacting High-Income countries and emerging economies. Income losses, poverty increase, and struggling businesses are some of the few problems that have emerged during this pandemic. While government intervention has somewhat provided support, the effectiveness is questionable. These last few years have reminded us of the fragile economies in the world, and the need for stark financial systems.
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