2020 GLOBAL CRISIS COVID - 19
(Cities under lockdown pictures, clockwise starting from top left: Wuhan City, China; Venice, Italy; London, United Kingdom; San Francisco, United States)
2020 has been an annus horribilis, especially with the outbreak and global spread of the coronavirus covid-19. Since the discovery of the coronavirus in Wuhan city, China, last December 2019, the world went into a downward spiral so fast that nobody could ever imagine possible.
Over the last 12 months, the worldwide spread of the coronavirus has been brisk and relentless with the number of infections rising exponentially and the number of casualties now reaching nearly 2 million. Not only has this been a public health crisis, but it is also a major economic crisis. Many governments have imposed lockdown on their residents for long period of time and eventually, their respective economies went into a deep contraction. Ultimately, the global economy went into recession.
Many businesses shut down and went into bankruptcy. Many sectors like airline and aviation, food and beverage, hotel and leisure, entertainment, retail, travel and tourism have been battered. Millions lost their jobs, leading to rising unemployment rate. While trillions of dollars have been used to alleviate the recession and stimulate back the economy, the coronavirus pandemic is not over yet. It will take many years, if not decades, to recover from this global crisis.
"The rapidly changing economic environment and the massive impact on the US economy prompted the Federal Reserve to act fast by cutting down interest rates to near zero."
Last January, President Trump declared that the Covid-19 situation was totally under control in America. Unfortunately, the Trump administration mismanaged its Covid-19 response. Individual states were left unprepared with the lack of medical and protection equipment. Although President Trump never imposed a complete lockdown within the United States, with the rise of Covid-19 infection, various states started to impose a state-wide lockdown. California was first to do so, followed by New York state. America crossed the 100,000 mark in death cases last May.
The rapidly changing economic environment and the massive impact on the US economy prompted the Federal Reserve to act fast by cutting down interest rates to near zero. Various other actions were taken to support the American economy. Foreseeing the scale of the economic crisis, the CARES Act, representing an economic stimulus of USD 2.2T, was eventually agreed upon by both the Republicans and Democrats last March. Another Pandemic Relief package of USD 900B was also approved last December.
China discovered a viral agent, that was subsequently named Covid-19, spreading within Wuhan city in Hubei province and informed the World Health Organisation (WHO) last 31 December 2019. The coronavirus Covid-19 rapidly spread and the number of infections in China rose to a high of 15,152 last February.
Milan, the capital of Lombardy, became the next Covid-19 epicenter. Italy, then France and eventually many European countries went into lockdown. On 11 March 2020, WHO declared Covid-19 a pandemic. By then, the coronavirus was rapidly spreading within communities in many countries globally.
Even though President Trump said that America was ready to deal with the coronavirus, the number of infected people rapidly increased. The state of California was first to impose a lockdown. This was followed by New York state. On 17 April, the United States recorded the highest number of deaths from Covid-19 with 6,409 cases.
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The impact of the coronavirus pandemic has been massive, and the aftereffect will be felt in the years to come. The speed at which millions of workers lost their jobs was incredible. Compared to 2019, the ILO estimated that globally, millions of working hours were lost, resulting in millions of workers out of job overnight. Moreover, with countries in lockdown, supply chains were disrupted. Global trade in goods and services decreased significantly in 2020, according to UNCTAD.
The travel and tourism sectors were severely disrupted. People movement was strictly controlled and prohibited in many instances. As a result, the tourism sector was badly affected. Airplanes were grounded, and global airlines incurred massive losses. Employees were furloughed and airplanes were mothballed with no immediate plans to use them. The economic impact on all these industries run in the trillions.
To support the global economy, mainly developed countries unleashed trillions of dollars in economic stimulus, to prevent job losses and industries from collapsing completely. Till the coronavirus spread is fully controlled, trillions more will be needed to support workers and businesses. As for those in developing countries, the situation is even more catastrophic, and millions will fall below the poverty line. The war against covid-19 is ongoing with the hope that vaccines can stem the spread. However, the aftermath and economic recovery from this disaster will take years.
The global economic devastation due to the pandemic is unprecedented. Last October, according to IMF, many governments around the world unleashed massive fiscal stimuli, amounting to $11.7T and economic stimulus via central banks was over $7.5T. The war against the pandemic is not over yet. Trillions more will be needed.
Both the IMF and World Bank are foreseeing an economic recovery in 2021, based on the assumption that vaccines against the coronavirus are available and large segments of the global population will be immunised. In its last Global Economic Prospects, the World Bank estimates that the global economy contracted by 4.3% in 2020, but it is projecting that growth in 2021 will be 4%. However, there are still many uncertainties ahead.
The silver lining is that pharma companies have been working swiftly to come out with vaccines. While vaccine development can take more than 10 years, many pharma and biotech companies from various countries have already come out with various potential vaccines. Time is of essence for the vaccine rollout, since with the covid-19 still spreading, new variants are appearing. While we can only hope for the best in 2021, we need to also prepare for the worst.
(For this post related to Covid-19: All data about the coronavirus covid-19 from Jan-Dec 2020 are from the World Health Organisation - https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports ; https://covid19.who.int/ )
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