Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

COVID-19 shook, rattled and rolled the global economy in 2020

CoronavirusDec 31, 2020 07:50
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Employees wearing face masks work at a factory of the component maker SMC during a government organised tour of its facility following the outbreak of the coronavirus disease (COVID-19), in Beijing

By Dan Burns and Mark John

(Reuters) - When 2020 dawned, the global economy had just notched its 10th straight year of uninterrupted growth, a streak most economists and government finance officials expected to persist for years ahead in a 21st Century version of the "Roaring '20s."

But within two months, a mysterious new virus first detected in China in December 2019 - the novel coronavirus - was spreading rapidly worldwide, shattering those expectations and triggering the steepest global recession in generations. The International Monetary Fund estimates the global economy to have shrunk by 4.4% this year compared with a contraction of just 0.1% in 2009, when the world last faced a financial crisis.

Graphic: https://tmsnrt.rs/3hsgo9K - https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/xklvyjlxkpg/chart.png

Government-mandated shutdowns of businesses and any non-essential activities in much of the world unleashed a wave of joblessness not seen since the Great Depression. Still, unemployment levels varied dramatically across the globe.

In some countries, like China, COVID-19 infection levels were effectively suppressed through strict but relatively brief lockdowns, allowing unemployment rates to remain low. Others, such as Germany, deployed government-backed schemes to keep workers on company payrolls even as work dried up.

Elsewhere, including in Brazil and the United States, the uncontrolled spread of the virus and patch-work government health and economic responses fueled rampant job losses. Some 22 million people in the United States were thrown out of work in March and April alone and the unemployment rate jumped to near 15%.

Most economists expect it to take a year or more for labor markets to return to something resembling the pre-pandemic era.

Graphic: Global unemployment in the pandemic - https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/azgvoyljgvd/chart.png

The pandemic delivered a body blow to global trade, with export volumes dropping abruptly to their lowest in nearly a decade in March and April.

The recovery since then has been led largely by China, which stands alone among major economies in seeing year-over-year growth in exports.

Graphic: Global exports have cratered almost everywhere - https://graphics.reuters.com/GLOBAL-DEBT/qzjvqorbyvx/chart.png

Unprecedented levels of government stimulus prevented even larger damage to many economies but also added to a global mountain of sovereign debt amassed by governments, raising questions about whether a financial crunch is the next crisis the world must deal with.

Graphic: Pandemic stimulus adds to the global debt mountain - https://graphics.reuters.com/HEALTH-CORONAVIRUS/GLOBAL-ECONOMY/qzjvqdqdlpx/chart.png

However, historically low interest rates hovering around – and sometimes below – zero percent mean that debt servicing costs for the Group of Seven (G7) economies are at their lowest since the 1970s, when the debt burden was only a fraction of what it is now.

"Debt today is sustainable and it will remain so for a few years because as long as economic activity and employment have not recovered momentum, central banks are unlikely to do anything with their interest rates. That allows governments to keep up the fiscal support in the form of retention schemes and support to firms," said Laurence Boone, the OECD's chief economist.

Graphic: The cost of countries' debt burdens has fallen - https://graphics.reuters.com/GLOBAL-DEBT/qzjvqorbyvx/chart.png

One offshoot of that largesse has been that consumer spending has held up better than many had expected. While spending on services plunged and remains depressed - at restaurants and for travel and leisure in particular - consumers did lay out for goods, especially big-ticket items such as cars and home improvements that benefited from rock-bottom interest rates.

As a result, retail sales in many economies are up on a year-over-year basis, in some instances by more than they were at the end of 2019.

Graphic: Retail sales have been a mixed bag - https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/azgpoylzgpd/chart.png

Another direct effect of all that government spending has been a surge in savings among consumers in many parts of the world. Government support payouts in developed economies padded household bank accounts and, with consumers hunkered down in the pandemic's early days in particular, savings rates soared.

They began returning to earth in the latter part of 2020 but remain well above pre-pandemic levels. Some economists see this as the dry tinder to help fuel an economic rebound in 2021 and beyond when COVID-19 vaccines allow a wider recovery to take hold and consumers to begin moving about - and spending - more freely.

Graphic: Personal savings rates soared during the pandemic - https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/nmovabodbpa/chart.png

COVID-19 shook, rattled and rolled the global economy in 2020
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email