By Takudzwa Sherekete
– Research Manager takudzwas@zam.co.zw
COVID – 19 AND ITS IMPACT ON THE GLOBAL ECONOMY
The Covid-19 virus has resulted in one of the deepest recessions globally. Most countries are expected to face economic recessions.
The worst affected sectors include tourism industry, transportation and construction and real estate.
On the other hand, the pandemic bodes well for the healthcare industry and the telecommunication and media industries.
The chart below shows an overview of the potential impact of the Covid-19 pandemic by economic sector.
The global economy was at its lowest during the March 2020 and has since started to recover as most countries have commenced the process of relaxing lockdown conditions.
However, the risk of a second wave of infections still poses a significant risk on the global economy. The extent of the recession is dependent on a few pre-Covid-19 economic conditions.
Namely, countries with higher pre-crisis vulnerabilities and trade and financial linkages with the global economy are more impacted by the crisis.
According to the IMF World Economic Outlook (WEO) as at June, the global economy is estimated to contract by circa 4.9%, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.
Fiscal and monetary policy support is according to the IMF estimated to have reached US$9 trillion as at May 2020. The breakdown looks like this:
- direct budget support is currently estimated at US$4.4 trillion globally, and additional public-sector loans and equity injections, guarantees, and other quasifiscal operations (such as non-commercial activity of public corporations) amount to another US$4.6 trillion.
The World Bank’s Outlook Report as at June also highlighted that the pandemic may have a long-term impact on the Emerging Market economies as many had already been forecasted to experience a slowdown in economic growth during 2020.
In order to soften the social and economic impact on the informal sector, policy makers are expected to provide timely and appropriate solutions.
This brief paper seeks to summarize the salient issues impacting the global economy and provide an outlook on the Zimbabwean economy post-Covid 19.
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