The COVID-19 pandemic began to appear in Wuhan, China in early 2020 and rapidly spreaded among the community at an alarming rate, causing the number of infected people to increase exponentially. The epidemic then spread around the world, forcing governments to introduce a series of measures such as social isolation, borders closing and minimize trading activities with other countries. As a result, the COVID-19 epidemic led to a series of consequences in many sectors, especially the world economy, causing a severe economic recession that the world has experienced in decades.
Recent forecasts by leading economists around the world have also shown that the global recession stemming from the COVID-19 crisis will be the deepest since World War II, with the majority of platforms. The world economy will experience a decline in GDP per capita as well as the stagnation of many specific industry groups such as tourism, services, etc. According to a report form the IMF, the pandemic is causing an “unprecedented decline in global activity”, it has had a more negative impact on activity in the first half of 2020 than, and the recovery is projected to be more gradual than previously forecast.
According to a study and prediction from the World Bank, compared to the crises of 1991 or 2009, 2020 will be the year that the world witnessed the worst and fastest recession and will take more time to recuperate the global economy.
World markets and developing economies are expected to face a huge "shock" when the global recession occurs. First of all, the pressures on the health system, foreign trade and tourism are stagnated, remittances are increasingly scarce, while countries are in desperate need of costs to maintain a stable economy, investment capital flows are decreased and national debt is increasing. Beside that, it can be seen that this widespread crisis has even had a strong impact on the global energy and oil and gas industries. During the peak of the epidemic, we have had to see countries try to sell off their national oil reserves at a low price, even down to negative numbers in order to stay active in the industry. The garment industry, which seemed unaffected, also had to shift to producing essential products such as masks or medical supplies, protective gear to maintain production and minimize multiple capital losses. For groups of industries still operating well during this period due to stable demand such as agriculture, food or pharmaceuticals, there are also certain difficulties because it is really hard to export or conduct transactions with foreign countries.
Even in some countries such as China, Vietnam, and European countries, the epidemic has been basically controlled, bringing the economy back to its original state will face many challenges. Currently, most countries have made adjustments to their 2020 GDP targets aiming at a reduction in pressure on groups of domestic economic sectors. Attempts to control and prevent COVID-19 in developing economies as well as those with low GDP with limited health systems and little funding, if prolonged, will exacerbate the economic situation. Challenges will strongly increase the debt which placing a great pressure on the economy.
In recent days, the number of Coronavirus cases has re-surged again in the US and many European countries, leaving these countries once again at risk of disease outbreaks and long quarantine periods, causing concerns for not only the people but also the governments because the economy has suffered too much damage since the first half of this year. According to a report on Thursday, October 29, the U.S. economy grew at a record 33.1% annual rate in the July-September quarter, but according to experts, even with such a growth rate, the US could not escape the crisis because of the number of COVID-19 cases in this country tends to rebound. In France, President Emmanuel Macron issued a declaration of a nationwide lockdown starting on Friday, October 30. In Germany, Prime Minister Angela Merkel has announced the closure of bars, restaurants and theaters for four weeks. Mrs. Merkel warned of a "challenging winter" when the daily reported German coronavirus infections hit their highest level after long-term control.
According to estimates of the US government, looking at the economic growth in the third quarter shows that the country has only recovered 2/3 of the output lost in the first and second quarters. Bailout packages have been suspended due to funding constraints, Goldman Sachs has launched a new growth forecast for the fourth quarter is 3% instead of 6% as previously. Similarly, in Germany, Oxford Economics has forecast that the country's 1.2% growth rate as previously forecast will need to be lower because given the current situation, it is unlikely that Germany can achieve their expected growth rate.
Dr. Emily Landon, medical director at the University of Chicago medical school, said two factors that facilitate the spread of the virus in winter, especially at restaurants: The air is colder and drier and droplets from the saliva of an infected person transmit the virus. This means that the coming winter is likely to be another tough battle for the nations of the world to prevent a COVID-19 outbreak from happening again.
Global financial is expected to face many difficulties and countries should probably only set a target for economic growth at a safe level because no one can say anything about the fate of each country in the current context. We can hold the hope that the epidemic will be under control when the vaccine comes into being, but much of it still depends on people's consciousness to ensure that Coronavirus does not spread rapidly in the community. Forecasts of a global financial crisis like 2007-2008 have also been predicted by many economists. Until now, all countries have been doing well in keeping their economies stable, but we need to have broader and more effective plans to ensure that the world finance will do not collapse when "risky winter" is coming.
References :
“The Global Economic Outlook During the COVID-19 Pandemic: A Changed World”. The World Bank. June 8, 2020.
AYHAN KOSE & NAOTAKA SUGAWARA. “Understanding the depth of the 2020 global recession in 5 charts”. World Bank Blogs. June 15, 2020. The World Bank.
Julia Horowitz. “The recession is much worse than the IMF expected and the hit to jobs 'catastrophic'”. CNN Business. June 24, 2020. CNN.
MARTIN CRUTSINGER AP Economics Writer . “Surge in virus threatens to reverse global economic rebounds”. October 30, 2020. abcNEWS.
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