In 2020, the global economy was shaken by the coronavirus pandemic. Companies are being forced to cut back on their operations while government expenditure on material support is rising. Now, the main question is How Economy will recover after Covid-19? What part will vaccines play in the recovery of the economy in 2021?
According to research conducted by the Institute for Economics and Peace (IEP), high levels of Positive Peace and successful institutions, social harmony, and open, representative governments would assist countries worldwide in their economic recovery. Positive Peace is defined as the attitudes, institutions, and structures that create and sustain peaceful societies.
Global GDP has fallen by 3.5% since the Covid-19 crisis began. The implementation of vaccine programs will assist in stabilizing the ship. Still, the pace at which countries recover, including increases in employment and consumer confidence, depends on how rapidly the virus is brought under control.
Although the global economy is projected to grow 5.5% in 2021 and 4.2% in 2022, the report warns that the slower vaccination rate in developing countries than industrialized economies is “a major headwind to activity.”
Everything now relies on the results of the race between a mutating virus and vaccinations to end the pandemic, as well as policymakers’ willingness to provide adequate support until that happens. There is still much confusion, and the outlook varies a lot from country to country.
Although the pandemic had a devastating economic impact worldwide, Asian countries have recovered much faster, especially China. Overall, thanks to early public health initiatives and government fiscal support, GDP growth in emerging and developing Asian economies is expected to reach 8% this year. In comparison, Europe’s GDP will only rise by 5.2% in 2021, while the United States will only grow by 3.1%, according to the International Monetary Fund (IMF).
Bloomberg Economics reports that citizens’ mobility and spending increased in February in Spain, the United States, Russia, Canada, and the United Kingdom.
With advanced economies expected to rebound more quickly, the decade’s momentum toward convergence is at risk of being reversed. About half of emerging markets and developing economies catching up to advanced economies in terms of per capita income over the previous decade are projected to diverge between 2020 and 2022.
Below you can see the latest economic outlook growth projections country-by-country, released by IMF January 2021 report:
Bloomberg analysts write that consumers worldwide have amassed $2.9 trillion due to coronavirus restrictions, which are still in force in some countries, which is a powerful potential for recovery from a pandemic recession. However, as long as there are government subsidies, citizens will not abandon this pattern of behavior. For example, the United States is preparing another round of assistance to the population, during which Americans will receive checks for $1400.
More than half of all savings are in the United States – $1.5 trillion, followed by China – $430 billion, Japan – $300 billion, Great Britain – £117 billion, Germany – €142 billion, France – €125 billion, Spain – €66 billion, Italy – €54 billion.
Experts believe that when the restrictions are lifted, citizens will return to shops, restaurants, entertainment establishments, start traveling and make expensive purchases, which they refused. However, another question arises: will consumers spend their savings?
Using accumulated funds in the U.S., for example, will lead to GDP growth of 9%, but if savings remain unspent, the economy is likely to grow by only 2.2%.
A factor that can increase the desire to spend savings is low-interest rates, which reduce the attractiveness of keeping funds in a bank. On the other hand, people may choose to keep their savings because of potential risks: the emergence of a new pandemic, the slow recovery of the labor market and its volatility, and the desire to have a safety cushion connected with future crises.
Besides, the IMF is discussing $650 billion in SDRs (Special Drawing Rights) to help the global economy recover from the pandemic, according to the International Monetary Fund’s statement. SDRs are reserve assets that countries can use to supplement their foreign exchange assets, such as gold and U.S. dollars.
According to IMF Managing Director Kristalina Georgieva, this issue of SDRs will provide the global economy’s long-term need for reserves, which can help all IMF member countries and support the global economy on its way to recovery.
Furthermore, to bring the pandemic under control worldwide, strong multilateral cooperation is needed. Boosting support for the COVAX facility to expedite vaccine access for all nations, ensuring universal vaccine delivery, and promoting universal access to therapeutics at reasonable rates are examples of such efforts. Ghana became the first country to receive vaccines as part of the United Nations-led COVAX program, which is set to deliver tools to fight the coronavirus pandemic to 92 low and medium-income nations, funded by the rest of the world. The World Health Organization (WHO) called on wealthier countries not to undermine the COVAX program, which supports a global sharing of Covid-19 vaccines to ensure developing countries gain access to 2 billion doses.
Despite Germany pledging an extra €1.5 billion ($1.82 billion) to COVAX just last week, along with fresh commitments from other G7 nations, WHO chief Tedros Adhanom Ghebreyesus warned that “if there are no vaccines to buy, money is irrelevant.”
OECD Chief Economist Laurence Boone stated that: “Widespread vaccination of the adult population is the best economic policy available today to get our economies and employment growing again,” she said. “If we are at war with the virus then we need to put vaccine production on a war footing, provide the necessary resources and speed up deployment across the world.” “If we don’t get enough people vaccinated quickly enough to allow restrictions to be lifted, the recovery will be slower and we will undermine the benefits of fiscal stimulus,” she added.
WTO also reported recovery of global trade in 2021 hinges on widespread Covid-19 vaccination. Until now, more than 652 million doses have been administered across 151 countries, rounding up to 4.3% of the global population, according to data collected by Bloomberg. The latest rate was roughly 17.2 million doses a day.
While the most effective vaccinations are thought to be 95% effective, preventing a pandemic involves a coordinated campaign. At the current rate of 17.2 million per day, reaching a substantial level of global immunity will take years. However, the rate is slowly growing, and new vaccines from new manufacturers are being introduced to the market.
Apart from all of the above mentioned, let’s remember that we all also play a role in fighting the pandemic. Wearing masks, washing your hands constantly, and maintaining social distance are appropriate measures we all can take on for a better future. Let’s Fight This Virus Together!
