The COVID-19 pandemic has spread with alarming speed, infecting millions and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus. The June 2020 Global Economic Prospects describes both the immediate and near-term outlook for the impact of the pandemic and the long-term damage it has dealt to prospects for growth. The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020. What will the world look like after COVID-19? Many of the problems we will face in the next decade will simply be more extreme versions of those that we already confront today. We expect a rise of digital behavior such as remote working and online learning, video streaming and conferencing, telemedicine, and food delivery services.
Not long ago, some rather interesting things happened on the world economic front. At that time, popular stocks in the leading stock markets came to fall by about 20%. The stocks made an attempt to resuscitate, especially when the European central bank announced that there was a plan to improve things through collaboration with the Eurozone market. There was no indication of definite plans on how this would actually be done. Nevertheless, many celebrated this announcement with the hope that, at last, some light was coming out of the tunnel. A little dim, but a hopeful point, nonetheless.
Then other interesting things came. Like a thunderbolt, China announced a major decline in the national GDP by a whopping 6.9%. This was, apparently, the lowest decline in national fortunes for more than 25 years. Today, the leading world economic leaders are saying that this might affect the world in a way that is vastly unimaginable.
Have you ever thought about it? What is really common between China, oil and the steel industry? Plenty, some people say. In reality, these diverse entities may have several things in common: Anxious faces, unsteady guts and a nail-biting tendency. This is, perhaps, what they all share in common.
As we talk, you are probably planning to have a skiing session out on the slopes of the Alps in Switzerland, or some other fancy place. It is understandable that, at such times, you probably do not want to hear the term recession mentioned. Of course, if you are a banking mandarin planning to get more interest over money belonging to others, such a word is not welcome either.
Yes, who can doubt that China is today one of the world's secret superpowers? For this reason, if China is ridden with the smallest issues that some may think is not significant, the ballooning effect in the world economy could be truly devastating. They could be some huge challenges lurking on the way. The changes can be quite compelling as well. The trials might be both short-term and long term. In this situation, who will be able to lift his head out of the deep economic abyss?
Some also ask: What is really going on? Interestingly, some have made their case claiming that in the next few months or years, the world will have less demand for fuel. But this might just be a mere hypothesis. In the midst of this, a valid question comes: Is the world becoming gradually less dependent on oil from the Middle East? Can this really happen? If this is so, the prices will drop with less demand. Even so, many areas of the world economy are usually affected adversely when the prices drop in this manner.
But the world market is generally affected by so many factors other than the price of oil. Truly the world shares and stocks are not just affected by the uncertain oil market. Other significant areas of the economy are getting affected by the day. One of this is a celebrated giant in the name of the mining industry. Consider countries like Brazil, Russia and South Africa. In these countries, the prices of mining shares have been steadily dropping over the years. With this trend, you can guess that after a while, the overall prices of ordinary commodities will follow suit and drop significantly.
Have you heard of the cataclysmic term, Armageddon? Yes, to many people Armageddon means destruction, utter loss, disaster. Today, some major financial authorities are pulling in all directions in the attempt to catch up with the perpetually slipping prices of stocks. An Armageddon in the making?
Nevertheless, in the midst of all these, shouldn't we be optimistic? We expect that the world economy will rise up again, like the proverbial phoenix, at the end of the day. Nevertheless, the journey is filled with lots of challenges. While we all love to be optimistic, it might be wise to entertain what many call ‘a guarded optimism'. The signs are crystal clear: there could actually be another round of world recession looming on the wings.
At one time, in recent years, the world economy was estimated to grow at the rate of 3.1%. Nevertheless, several factors eventually worked against this initial positive trend. The highly delicate economies of nations like Brazil, Russia, coupled with the Chinese crisis as well as trouble at the US Federal Reserve Bank all combined to spell doom for the momentary glad tidings.
Where, then, will we get some real good news? Only the passage of time will tell.