The COVID-19 pandemic has spread with alarming speed, affecting millions of people and bringing the global economic activity to a near-standstill because the countries sanctioned tight restrictions on the movement of people to address the spread of the virus. The pandemic badly influenced international trade and tourism. The June 2020 Global Economic Prospects highlighted that the impact of the pandemic has long-term damage to the prospects of growth. The Global Economic Prospects’ baseline study forecasts a 5.2 percent contraction in the global GDP in 2020. In this article, an attempt has been made to highlight some of the implications of the COVID–19 on the global economic growth rates.
The implications of the COVID-19 on the Global Economy from the time when the COVID-19 outbreak was first detected was spread over more than 200 nations. Due to COVID-19 pandemic, the global economy adversely affects the economic growth rates of the nations. The estimations showed that COVID -19 could weaken world economic growth by 3.0% to 6.0% in the year 2020. The pandemic raises the risk of a global downturn with the rising levels of unemployment which is not experienced by the nations since the Great Depression of the 1930s. This pandemic also affects international trade by reducing from 13% to 32%, dependent on the seriousness and degree of the global economic recession. International trade and tourism affected the most due to COVID-19.
It is evident from Figure 1 that the economic condition residues highly melted in many countries and regions around the world; it shows that world economic growth tremendously declines in the year 2020 in all the countries. The Organization for Economic Cooperation and Development (OECD) estimated that the growth will decline by 6.0% to 7.6% in 2020, it is based on the spread of second wave of COVID-19 infections (OECD Report on 22nd June 2020). It is also clear from Figure 1, based on the IMF estimations the global economy could drop by 4.9% in 2020. According to IMF, the global economy would experience its “worst recession since the Great Depression”. The IMF projected that UAE’s real GDP growth rate is going to decline to -3.5% for the year 2020. The World Bank’s baseline estimates indicate that global economic growth could shrink by 5.2% in 2020. In similarity, the IMF forecasted a 4.9% decline in the global growth rate in 2020 and will recover the growth by 5.4% in 2021. The World Bank forecasted that economic growth in UAE will decline to 1.1% in 2020 and while the IMF projected UAE growth rate will decline by 3.5%.
The Covid-19 experience shows that it is difficult to estimate the costs of global economic activity. It raises many uncertainties like loss of jobs for workers both temporarily and permanently. Many countries will experience meltdown in economic activities and issues related to tradeoffs between public health and the influence of economic policies to understand the spread of the virus.
McKibbin, W., and R. Fernando. 2020. Macroeconomic Impacts of COVID-19: Seven Scenarios. Washington, DC: Brookings Institution.
World Bank. 2020. Global Economic Prospects. World Bank Group Flagship Report, June. Washington, DC: World Bank.