Global Economic Effects of COVID-19



James K. Jackson, Martin A. Weiss, Andres B. Schwarzenberg, Rebecca M. Nelson, Karen M. Sutter, and Michael D. Sutherland | Congressional Research Service

The COVID-19 viral pandemic has been individually experienced, but globally shared. It disrupted lives across all countries and communities and negatively affected global economic growth in 2020 beyond anything experienced in nearly a century. Estimates so far indicate the virus reduced global economic growth to an annualized rate of -4.5% to -6.0% in 2020, with a partial recovery of 2.5% to 5.2% projected for 2021. Global trade is estimated to have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021. According to a consensus of forecasts, the economic downturn in 2020 was not as negative as initially estimated, due, at least in part, to the fiscal and monetary policies governments adopted in 2020. Major advanced economies, which comprise 60% of global economic activity, are projected to operate below their potential output level through at least 2024, which will negatively affect national and individual economic welfare. Compared with the synchronized nature of the global economic slowdown in the first half of 2020, the global economy showed signs of a two-track recovery that began in the third quarter of 2020 with developed economies experiencing a nascent recovery, but economic growth in developing economies lagging behind. A resurgence in infectious cases in Europe, Russia, the United States, Japan, Brazil, India, and various developing economies renewed calls for lockdowns and curfews and threatened to weaken or delay a potential sustained economic
recovery into mid to late 2021.

Since the beginning of 2021, developed economies have made strides in vaccinating growing shares of their populations, raising prospects of a recovery in those economies and, in turn, the broader global economy. However, a surge in diagnosed cases in large developing economies and resistance to vaccinations among some populations in developed economies raise questions about the speed and the strength of an economic recovery over the near term. The economic fallout from the pandemic could risk continued labor dislocations as a result of lingering high levels of unemployment not experienced since the Great Depression of the 1930s and high levels of debt among developing economies. Job losses have been concentrated more intensively in the services sector where workers have been unable to work offsite.

The human costs in terms of lives lost will permanently affect global economic growth in addition to the cost of elevated levels of poverty, lives upended, careers derailed, and increased social unrest. Some estimates indicate that 95 million people may have entered into extreme poverty in 2020 with 80 million more undernourished compared to pre-pandemic levels. In addition, some estimates indicate that global trade could fall by an annual amount of 9.0% or slightly less in 2020 as a result of the global economic downturn, exacting an especially heavy economic toll on trade-dependent developing and emerging economies. While the full economic impact of the pandemic is coming more into focus in developed economies where vaccinations are facilitating a return to prepandemic levels of economic activity, the global impact remains less certain as new viral outbreaks have worsened the economic impact in some developing economies. This report provides an overview of the global economic costs to date and the response by governments and international institutions to address these effects.


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