This article aims to explore how COVID 19 pandemic has affected global growth, output, and consumer preferences. The authors use data from OECD countries to compare COVID and global financial crisis. The global economic slowdown that is expected to result from the COVID pandemic is expected to be smaller than the effects of the 2008 global financial crisis. However, there will be more effects on emerging market economies than on advanced ones.
Global economic slowdown
The global economy is entering a pronounced slowdown after its rebound in 2021. Rising debt, inequality, and COVID-19 infections have all weighed on the world’s economy, and new threats are emerging from all these directions. In fact, the World Economic Outlook predicts that global growth will decline from 5.5 percent in 2021 to 4.1 percent in 2022, and 3.2 per cent in the following year. Meanwhile, the global population is expected to contract by more than 1 billion in the same period.
Despite the risks associated with a new COVID outbreak, emerging economies have managed to avoid major damage from the global financial crisis. But a new coronavirus outbreak could leave them a full four per cent smaller in 2024 than they were predicted to be before the virus spread. In addition, the loss for Latin America will top six per cent, and that of emerging Asia is nearly eight per cent. Such losses will make these regions even more vulnerable to future economic calamities.
Impact of COVID-19 pandemic on global growth
In a recent survey, executives reported diminishing optimism about the impact of the COVID-19 pandemic on global economic growth. Although executives still rank containment scenarios as the most likely, the proportion of respondents ranking them as the most likely has fallen. In the last four months, 43 percent of executives have selected containment scenarios for the global economy. Compared to this, only 28 percent cited containment scenarios for their own economies.
While the outbreak of COVID-19 appears to have peaked in China, its impacts on global economic growth are far-reaching. Despite its slowdown in China, the virus is spreading across South Korea, Iran, and the United States, and authorities in these countries have been increasingly restrictive in trying to contain the outbreak. Moreover, the outbreak has already slowed the economic growth in Europe and Japan, which are already likely in recessionary territory. The United States has entered the crisis with a tailwind, but some analysts are now forecasting a decline in U.S. GDP in the second quarter.
Impact of COVID-19 on global output
Despite a comparatively low severity of COVID-19, the effect on the global output of advanced and emerging market economies remains uncertain. Although lower contribution from production
factors and lower technological gains could explain the overall decline, policy responses have masked the impact. This suggests that there is still a risk of long-term scarring in global output. But how to deal with it? Let’s look at three scenarios.
The latest McKinsey Global Survey, conducted from April 6-10, indicates that corporate executives are more optimistic about the economy and its prospects than they were six months ago. While global optimism is higher than it has been since the global financial crisis began, weak demand will remain a key risk for growth. And while the pandemic remains a major concern, executives in developed markets are still optimistic. In developing countries, the impact of COVID-19 on their economies remains the greatest concern, with the risk of an economic recession looming large.
Impact of COVID-19 on global consumer preferences
The impact of the global COVID-19 outbreak on consumer behavior was unprecedented. Consumer attitudes and purchasing patterns changed significantly. Considering the global scope of the disease, it is no wonder that the media focused on the crisis in unprecedented depth.
However, this crisis is not the end of global consumer behavior. In fact, it may have only begun to change consumers’ attitudes and preferences. Read on to understand how COVID-19 affected global consumption.
The global consumer class has long been characterized as the middle class. Fifty years ago, this class largely resided in Western countries, but today, it is everywhere. By 2030, middle class populations will number 4.8 billion with 335 million of them being wealthy. Furthermore, people are living longer in Asia, and global consumers are aging. This trend will continue long after COVID-19 is gone.
Impact of COVID-19 on global financial crisis
The COVID-19 spread is a major cause for concern, because it could result in an even greater downturn than the current one, exposing financial vulnerabilities that have been building up in an environment of low interest rates. Further, this shock would exacerbate the existing problems in the global financial system, as asset managers facing large outflows of capital could be forced to sell into falling markets. Leveraged investors could also face further margin calls and unwind portfolios, further aggravated by selling pressures.
National governments have reacted uncoordinatedly to the virus, announcing billions of dollars in special-purpose loans and financial support for certain sectors. The United States Federal Reserve has cut its policy rate in an effort to help countries affected by the COVID-19 pandemic and to prevent a wider financial crisis. However, this measure may only be effective if it’s accompanied by measures that support the recovery of the most vulnerable economies.