According to IMF, the global economy is expected to shrink by over 3 percent in 2020 – the steepest slowdown since the Great Depression of the 1930s.
Amid the coronavirus pandemic, several countries across the world resorted to lockdowns which meant confining millions of citizens to their homes, shutting down businesses and ceasing almost all economic activity. Now, as some countries lift restrictions and gradually restart their economies, here’s a look at how the pandemic has affected them and how they have coped.
How hard has the economy been hit?
The pandemic has pushed the global economy into a recession, which means the economy starts shrinking and growth stops.
In the US, since March 21, more than 36 million have filed for unemployment benefits, which is almost a quarter of the working-age population.
Coronavirus (COVID-19) and global growth
The IMF’s estimate of the global economy growing at -3 percent in 2020 is an outcome “far worse” than the 2009 global financial crises.
Advanced economies have been hit harder, and together they are expected to grow by -6 percent in 2020. Emerging markets and developing economies are expected to contract by -1 percent.
Oil and natural gas
Due to the fall in travel, oil prices fell further in March as the transportation section, which accounts for 60 percent of the oil demand, was hit due to several countries imposing lockdowns.
Not only oil, but the demand for natural gas also fell, as a result of which many Chinese LNG buyers halted their imports as storage tanks filled.
Due to lockdowns in China, followed by in the US and Europe, the demand for industrial metals reduced as factories shut down. As per IMF, China accounts for roughly half of the global demand for industrial metals.
Food and beverages
IMF projects a decrease in food prices by 2.6 percent in 2020, caused by supply chain disruptions, border delays, food security concerns in regions affected by Covid-19 and export restrictions.
Response from the countries
Many advanced economies in the world have rolled out support packages.
In India, Finance Minister Nirmala Seetharaman has announced some details of the Atmanirbhar Bharat Abhiyan package, to provide relief to Medium, Small and Micro Enterprises (MSMEs) in the form of an increase in credit guarantees.
However, even as economic activity resumes gradually, the situation will take time to normalize, as consumer behaviors change as a result of continued social distancing and uncertainty about how the pandemic will evolve.
Therefore, along with clear and effective communication, broad monetary and fiscal stimuli will be required to be coordinated on an international scale for maximum impact, and, “would be most effective to boost spending in the recovery phase.”