A tale of woe - global economy in lockdown
To question whether or not we are in a recession is pointless - we are. More significant questions would be how long and how severe?
The COVID-19 coronavirus pandemic placed more than one third of the world's population on lockdown to prevent its spread. It also triggered the worst recession since the Great Depression of the 1930s. It has created dire repercussions for world economies, hot on the heels of the global economic slump of 2019 in which stock markets and consumer activity stagnated, and comparable to the last world recession of 2008.
The recession has caused a staggeringly high increase in unemployment the world over, so much so that many unemployment insurance systems are unable to keep up with applications. It is predicted that global unemployment will cut almost seven per cent of working hours globally, expected to rise to around 10 per cent, and lose the equivalent of almost 195 million full-time employees.
The developing world is also affected by a drop in remittances, which in turn worsened the global food crisis. The recession caused a drop in the price of oil, too, due to the oil price war and the disintegration of the tourism and hospitality industries and the energy industry. Global stock markets, including the JSE, crashed by around 20 to 30 per cent and recorded its largest declines since the 2008 financial crisis. Bitcoin, amongst other cryptocurrencies, dropped 40 per cent, experiencing its worst blow in seven years. Dow futures tumbled more than 1 000.
Recently, over 75 per cent of countries reopened just at the same time as the pandemic worsened in many emerging market and developing economies. Several countries have started to recover, yet without a cure or vaccine, the durability of the recovery is deeply uncertain and the impact on finance sectors and countries unclear and uneven.
Compared a previous economic outlook forecast, a deeper recession in 2020 and a slower recovery in 2021 is now projected. Global output is projected to decline by five per cent in 2020 followed by a partial recovery. These projections do, however, indicate a total loss over of over $12 trillion over the next two years.
Increasing infections rates may decrease mobility and spending, effectively unsettling financial conditions and causing debt. Further tension in geopolitical and trade sectors may damage fragile global relationships at a time when trade is projected to collapse by around 12 per cent.
The lack of business confidence and high unemployment rates have had an adverse effect on consumer confidence and spending habits around the world.
As the health crisis fluctuates in different parts of the world, the terrifying statistics on GDP growth, unemployment, and business casualties are not liable to ease up soon. Many countries are caught in this recession, which, steadily, enveloped the whole world. This will take many years to overcome, and even then, its effects and damage will take many years more to repair. It is pertinent to keep in mind that this crisis is unprecedented. It affects us all inevitably, and no-one is invulnerable.