The consequences of the coronavirus pandemic and what should be done

The impacts of the coronavirus pandemic on the world economy are dramatic. In addition to the massive collapse of world trade, capital is being withdrawn from emerging countries in historical proportions – only in the initial phase of the pandemic it was 100 billion dollars, according to IMF estimates. Direct investments have been reduced in the same way as remittances. Commodity prices fall, while at the same time public spending to fight the pandemic rises.

The impacts of the coronavirus pandemic on the world economy are dramatic. In addition to the massive collapse of world trade, capital is being withdrawn from emerging countries in historical proportions – only in the initial phase of the pandemic it was 100 billion dollars, according to IMF estimates. Direct investments have been reduced in the same way as remittances. Commodity prices fall, while at the same time public spending to fight the pandemic rises. The fiscal debt of many countries is increasing enormously, and, especially for emerging and developing countries that are already burdened with high debt, the crisis is like a fire accelerator. Not only for economic problems – the health crises, caused by COVID-19, and the measures to contain the pandemic, come together in many places with other multiple and deep structural crises: poverty, hunger, the consequences of climate change , gender injustice and the exploitative care economy. And the pandemic hits migrant workers, migrants and refugees particularly hard. The COVID crisis makes exploitative relations visible in the global economy, such as migratory work by millions of people in agriculture, mining or the textile sector. The pandemic couples with and reinforces massive inequity in interaction with all other crises – from climate disaster to government failures. Because, in fact, we are not threatened in the same way by the virus, or affected in the same way by the measures to contain its expansion – this is already shown, at this point, by the global data. Vulnerable groups, the marginalized in each country, are disproportionately affected. The pandemic undoubtedly increases the global gap in the short term. But if the crisis is taken as a starting point to address social inequity and climate change, with aid packages and debt relief, to tackle the structural causes of poverty and resource exploitation, then the pandemic can be also an opportunity to face the multiple crises intertwined. Lots of open questions.

The world in a deep economic crisis

Governments around the world are reacting to the pandemic with lockdowns and movement restrictions and quarantines, which are leading us to an economic crisis of historic dimensions. Former IMF chief economist Kenneth Rogoff says never before has a crisis been so fast and so deep. It affects all areas of life, the productive sector, the service sector and all corners of the world. The World Economic Outlook (June 2020) predicts an average drop in global gross domestic product (GDP) of 4.9%. The summer 2020 forecast of the Commission of the European Union assumes that the economy in the Euro zone will shrink in 2020 by 8.7%, and that of the entire European Union by 8.3%. For France (-10.6%) and Italy (-11.2%), these drops in GDP are historic.

The most serious economic recession since the 1960s is expected in emerging countries. Countries like Brazil or South Africa were already weakened before the coronavirus crisis, and they will now have a particularly difficult fight. In Africa there is an economic recession for the first time in 25 years. The consequences seem to be clear: More hunger, more poverty and growing inequality in the world. A 5% drop in global GDP – according to estimates – means extreme poverty and insecurity