By Jaya Ramachandran
GENEVA (IDN) — A once-in-a-century crisis—a Great Disruption unleashed by the COVID–19 pandemic—hit the world economy in 2020. The pandemic has reached every corner of the globe. Meanwhile, more than 120 million have been infected and close to 2.7 million people killed worldwide.
High unemployment and loss of income have pushed millions into destitution during the pandemic. The total number of people living in poverty is expected to have increased by 131 million in 2020 alone. As many as 797 million people will still be trapped in extreme poverty in 2030, representing a poverty headcount ratio of over 9 per cent.
“The cardinal Sustainable Development Goal (SDG) of eradicating extreme poverty by 2030 will likely be missed by a large margin. Poverty will remain pervasive in sub-Saharan Africa and many landlocked countries,” warns the United Nations ‘World Economic Situation and Prospects 2021‘. “Other SDGs will suffer collateral damages as a consequence of rising poverty.”
Africa has been experiencing an unprecedented economic downturn with major adverse impacts on the long-term development of the continent. East Asia saw a sharp deceleration in economic growth in 2020, marking the region’s weakest expansion since the Asian financial crisis.
The pandemic and the global economic crisis have left deep marks on South Asia, turning this former growth champion into the worst-performing region in 2020. Without exception, all economies in the region have been badly hit by the crisis, whose impact has been amplified and accelerated by existing vulnerabilities.
In Western Asia, the pandemic and the subsequent mitigation measures stalled economic activities across the region. The pandemic’s impact was felt most acutely in the region’s high-performing tourism sector, and that impact led to a significant weakening of accommodation, transport, and wholesale and retail trade services.
Latin America and the Caribbean have suffered the devastating consequences of the pandemic, as evidenced by both the heavy human toll exacted and the massive economic damages incurred. The health crisis has been accompanied by an economic downturn of historic proportions, which follows several years of disappointing growth.
This grave situation has prompted UN Secretary-General António Guterres to remark: “We are facing the worst health and economic crisis in 90 years. As we mourn the growing death toll, we must remember that the choices we make now will determine our collective future.”
The UN Chief was referring to the historic Great Depression—a worldwide economic downturn that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world, sparking fundamental changes in economic institutions, macroeconomic policy, and economic theory.
Some economists believe that the rearmament policies leading up to World War II helped stimulate the economies of Europe in 1937–1939. When the United States entered the war in 1941, it finally eliminated the last effects of the Great Depression.
In 2020, for several months uncertainties and panic began paralysing most economic activities in both developed and developing economies. Trade and tourism came to a grinding halt, while job and output losses exceeded levels seen in any previous crisis after the Great Depression. In a matter of months, the number of people living in poverty increased sharply, while income and wealth inequality trended towards new highs.
Governments around the world responded rapidly—and boldly—to stem the health and economic contagion of the crisis. Fiscal and monetary stimulus packages were quickly rolled out to save the economy.
While timely and massive fiscal interventions helped to prevent the worst, they did not mitigate the broader discontent that stems from the marginalization of the most vulnerable population groups and the stark inequality that divides the haves and the have nots.
Further, as the ‘World Economic Situation and Prospects 2021’ underlines, “limited fiscal space and high levels of public debt constrained the ability of many developing countries to roll out sufficiently large stimulus packages”.
In fact, the short-term economic costs of the new edition of Great Disruption do not fully account for its long-term impacts on employment, productivity and potential output. While large-scale fiscal stimulus has prevented total economic collapse and supported the incomes of millions of households, there is little sign that these measures will boost long-term investments and create new jobs.
And this, particularly in view of the fact that the global gross product fell by an estimated 4.3 per cent in 2020—the sharpest contraction of global output since the Great Depression. In contrast, world output had shrunk by 1.7 per cent during the Great Recession in 2009.
However, the GDP estimates mask the severity of the employment crisis unleashed by the pandemic, notes the UN report. By April 2020, full or partial lockdown measures had affected almost 2.7 billion workers, representing about 81 per cent of the world’s workforce.
The aggregate unemployment rate in the Organization for Economic Cooperation and Development (OECD) reached 8.8 per cent in April 2020, before falling to 6.9 per cent in November. Unemployment rates still remain high relative to pre-crisis levels in all developed countries.
The COVID-19 crisis has also wreaked havoc on the labour markets in the developing world. By mid-2020, unemployment rates had quickly escalated to record highs: 27 per cent in Nigeria, 23 per cent in India, 21 per cent in Colombia, 17 per cent in the Philippines and above 13 per cent in Argentina, Brazil, Chile, Saudi Arabia and Turkey.
Women have been particularly hit by the pandemic, as they account for more than 50 per cent of jobs in labour-intensive service sectors, such as in retail trade and tourism, where working remotely is often not an option for many workers.
While some crimes have registered a decline, women and girls are increasingly becoming victims of violence during the implementation of the lockdown measures. It is also likely child marriages will see a global uptick against the backdrop of falling female labour force participation and rising poverty.
“The long-term consequences of the crisis will be equally severe,” notes the report produced by the United Nations Department of Economic and Social Affairs (UN DESA), in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions.
The United Nations World Tourism Organization (UNWTO) and the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) also contributed to the report.
The study warns that the pandemic will likely accelerate the pace of digitalization, automation and robotization, which will further depress labour demand in the medium term. “While productivity will experience some growth in economic sectors embracing automation, average productivity growth will falter. Declining investments in fixed capital, low average productivity growth and lower labour-force participation rates will further depress the potential output of the world economy.”
Slow and protracted recovery of growth will in turn impact the realization of the 2030 Agenda for Sustainable Development. The pandemic has exposed the systemic vulnerability of the world economy. It has also shown that sustainable development—promoting inclusive and equitable growth, reducing inequality and enhancing environmental sustainability—can provide safeguards and resilience against future crisis.
In this context the UN report says, economic resilience with new fiscal and debt sustainability frameworks, societal resilience with universal social protection schemes and climate resilience with greater investments in the green economy must be the building blocks of resilient recovery.
“This will also require a stronger and more effective multilateral system which can complement and reinforce—not undermine—national efforts to put the world firmly on the trajectory of sustainable development,” notes the report. [IDN-InDepthNews – 24 March 2021]
Photo: The jobless in Malaysia. Source: Malay Mail.
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