Appraisal of Global Economic Outlook in the time of COVID-19

Abstract

Towards the end of 2019, the global economy appeared to be on an optimistic path of expansion, financial markets were bullish, and trade and political tensions were predictable. The onslaught of COVID-19 in early 2020, has abruptly cast a dark shadow of uncertainty through a concerted health, economic and humanitarian crisis playing out synchronously across the world. As countries have tried to ‘flatten the curve’ through lockdowns and social distancing guidelines, these measures have restricted the flow of goods, capital and labor, disrupted global supply chains, and resulted in losses of jobs and income, defaults and bankruptcies. Global efforts to flatten the ‘infection curve’ has triggered a macroeconomic ‘recession curve’. The IFIs have projected a contraction of the global economy ranging between 3.3 percent and 5.2 percent, which is likely to worsen under more pessimistic scenarios. Cross border flows such as trade, capital flows and remittances also are expected to shrink in 2020. Likewise, logistics restrictions have prompted multinational firms to either diversify supplies over efficiency gains or turn inwards. Tourist arrivals is estimated to fall by 60 to 80 percent in 2020, translating to a decline in international tourism receipts (exports) of USD 80 billion globally. Nevertheless, countries are trying to carve safe corridors or ‘bubbles’ where groups of countries that have tamed the spread of coronavirus would be allowed to travel only among themselves as tourists or even temporary migrants. Furthermore, consumers tend to buy more essential goods and postpone conspicuous consumption in uncertain times: worldwide spending on tourism has seen a fall of over 50 percent. Likewise, lockdowns have prompted adoption of digital and low-touch activities. Some countries stand out for having tackled COVID-19 through widespread testing and contact tracing, early preparedness; harnessing of technology, often a result of sustained public investments in health infrastructure and leadership that believes in accountability.