How COVID-19 Has Affected Economies Worldwide
December 17, 2020
The global economy continues to suffer tremendously as a result of the new reality that COVID-19 has created. Since the first quarter of 2020, the pandemic has damaged several market sectors as people have drastically adapted their eating, travelling, spending, and investing habits. Additionally, the effects of the virus on supply chains has forced a number of countries and businesses to question the advantages of globalization.
A supply chain is an organized network used to produce and sell a product or service. Previously, businesses have transported products to numerous countries, but this year’s unusual circumstances have forced companies to reconsider this system. Companies have been working to become less dependent on other countries, as well as devising ways to make their supply chains more efficient to account for future challenges. The New York Times article, “It’s the End of the World Economy as We Know It,” emphasizes that the drawbacks of globalization will not bring “so much a full-scale retreat from global trade as a shift toward regional trade blocs and greater emphasis on having companies build redundancy into their supply networks.” The article further argues that this movement against globalization existed prior to the pandemic, which considerably accelerated the process.
Globally, the economies of developing countries have been affected by two major challenges. First, particularly in these countries, many workers cannot afford to stop working because they need each day’s wages. In addition, these countries do not have sufficient funds to pay companies and struggling workers for the duration of the pandemic because, according to The Wall Street Journal, “such a move… might create more economic instability by sparking a selloff of the local currency.”
In India, for example, the pandemic-related loss of millions of jobs has driven individuals to move from cities back to their hometowns in rural areas, spreading the virus from urban areas to the countryside. GDP figures indicate a 7.5% decrease in India’s economic activity over the third quarter, which spanned from July to September.
While Mexican President López Obrador has decided against providing government aid to larger companies, he has allegedly created stimulus programs to help the poor and small businesses. Over the third quarter, in part due to U.S. demand for exports, Mexico’s economy grew by 12.0%. Similarly, relief initiatives have brought third-quarter-recovery in other developing countries, including Brazil and Turkey, which have experienced increases in economic activity of 7.7% and 6.7%, respectively. Nevertheless, these countries must work to ensure long-term market stability in the face of the continued spread of COVID-19.
Even more financially stable countries have struggled with the effects of the pandemic. Over the third quarter, Thailand has had an economic drop of 6.4% while the Philippines’ decline is 11.5%. Indeed, COVID-19 has severely affected numerous industries in both developing and developed nations. No matter the wealth of a country, the coronavirus has prompted economies around the world to seek means of effective recuperation.