COVID-19 & GLOBAL ECONOMY

COVID-19: HOPE SPRINGS FOR GLOBAL ECONOMY

COVID-19 cases across the world had eased to around 470,000 infections by the first week of June – nearly half of the 826,000 recorded in April – as a combination of lockdowns, vaccine rollouts and greater prevention helped.

But there is more work to be done, especially as a number of populous emerging economies continue to see higher rates of infection.

The International Monetary Fund (IMF) is proposing a fund to combat the virus globally, which it says will also generate an economic bonanza.

“At an estimated USD 50 billion, it will bring the pandemic to an end faster in the developing world, reduce infections and loss of lives, accelerate the economic recovery, and generate some USD 9 trillion in additional global output by 2025,” according to Kristalina Georgieva, managing director of the IMF. 

“It is a win for all — while around 60% of the gains will go to emerging markets and developing economies, the remaining 40% will benefit the developed world. And this is without taking into account the inestimable benefits on people’s health and lives.”

The IMF, the World Health Organization (WHO), the World Bank and the World Trade Organization (WTO) are all calling for the removal of blockages to expanding supply, and call on WTO members to accelerate negotiations towards a pragmatic solution around intellectual property. 

“A number of low- and middle-income countries are also making moves to invest in their own local manufacturing capacity, which is key not to just end this pandemic but to prepare for the next one,” the multilateral organisations said.

QUEST TO END COVID-19

Global authorities, especially under the Saudi presidency of G20 and technological breakthroughs, have been able to ensure that the world economy keeps chugging along. 

Under the kingdom’s G20 leadership last year, the world’s 20 most powerful economies launched ACT-Accelerator in response to a call for a global mechanism to accelerate the development of tests, treatments and vaccines and to ensure their equitable distribution. 

“Speeding up an end to the pandemic through the ACT-Accelerator would cost less than 1% of what governments are spending on stimulus packages to treat the consequences of the pandemic,” according to the WHO, which is spearheading the drive.

At a global level, about 20 doses per 100 people have been administered. Europe and North America have given double this ratio of inoculations, while the figure for Africa is less than two doses per 100. The 20 economies that were able to deliver the swiftest vaccine rollouts are estimated to have given between about 75 and 225 jabs per 100 people.

“Some countries are recovering much faster than others,” according to the Organisation for Economic Co-operation and Development. “(South) Korea and the United States are reaching pre-pandemic per capita income levels after about 18 months. Much of Europe is expected to take nearly three years to recover. In Mexico and South Africa, it could take between three and five years,” the OECD said.

ECONOMIC RECOVERY

The World Bank expects the global economy to recover 5.6%, but growth will be uneven as many parts of the world remain paralysed by the pandemic.

“Despite this year’s pickup, the level of global GDP in 2021 is expected to be 3.2% below pre-pandemic projections, and per capita GDP among many emerging market and developing economies is anticipated to remain below pre-COVID-19 peaks for an extended period. As the pandemic continues to flare, it will shape the path of global economic activity,” the World Bank forecasts.

The US and China – two of the world’s largest economies and the countries that have been among the most successful in curbing the virus – are expected to lead growth.

The US economy will surge 6.8% in 2021 courtesy of a fiscal stimulus and rapid vaccinations. Meanwhile, the Chinese economy will expand 8.5% this year.

“Growth among emerging market and developing economies is expected to accelerate to 6% this year, helped by increased external demand and higher commodity prices,” the World Bank said. “However, the recovery of many countries is constrained by resurgences of COVID-19, uneven vaccination, and a partial withdrawal of government economic support measures.”

Low-income countries will be hardest hit, with growth at 2.9% - the slowest pace of expansion in two decades.

In addition, global trade will rebound nearly 8% this year after a 5.3% contraction in 2020, according to the WTO.

However, the organisation expects trade growth to slow to 4% in 2022, as vaccine rollouts remain slow in emerging economies.

“Accelerated vaccinations would allow containment measures to be relaxed sooner, which could raise trade growth up to 2.5 percentage points above the baseline forecast in 2021 – returning trade to the pre-pandemic trend,” according to the WTO.