Yearender: Recession and recovery -- post-pandemic development to be bumpy with shreds of hope

Source: Xinhua| 2020-12-17 15:46:34|Editor: huaxia

BEIJING, Dec. 17 (Xinhua) -- The unchecked spread of COVID-19 throughout 2020 has plunged the world economy into an ever deeper recession, but hopes remain for a bumpy path to post-pandemic development.

A sharp contraction of international investment and trade, disruption of global chains of industry and supply, and upsurge of business failures and layoffs have battered the world with a lasting trauma.

As the progress of vaccine development is expected to lead the world out of the health crisis next year, the economic recovery seems to be tough as shreds of hope and uncertainties both have their roles, and global development will be uneven across different economies, industries and population groups.

HISTORIC BLOW

Following the warnings from the World Health Organization in February that "the window of opportunity (to contain the outbreak) may be closing," the out-of-control pandemic defined this year through and through, which dealt blow after blow to global economy and the quality of life.

Yelp, which publishes reviews of U.S. restaurants, bars and other businesses online, reported in October that about 164,000 businesses on its website have closed since March 1 and over half of them permanently.

Massive lockdowns caused by the coronavirus largely reduced the demand for travel and factory activities, leading to the slump of the demand for oil and its price.

In mid-February, the International Energy Agency forecast that oil demand growth in 2020 would be the smallest in the past decade. Then the agency in October revised the global demand to 91.9 million barrels a day (b/d) in 2020, down 8.1 million b/d year on year.

This year, global foreign direct investment dropped by 49 percent in the first half of the year, and the global economy is expected to contract by 4.4 percent.

The World Trade Organization (WTO) forecast the world merchandise trade to fall by 9.2 percent, while the International Labor Organization data showed a 14-percent drop globally in working hours during the second quarter of this year, equivalent to the loss of 400 million full-time jobs.

Concerns over the pandemic has jolted the market. In the United States, infections and death figures both remained the highest in the world for most of the year. Within merely 10 days, from March 9 to March 18, the initial circuit breaker was triggered four times on its stock exchanges as the benchmark S&P 500 Index dropped 7 percent or more.

On March 16 alone, there were about 816 single-stock suspensions, according to data from the NASDAQ exchange. On March 9, energy stocks were clobbered with Exxon Mobil falling 12 percent, its lowest close since 2004.

Liang Guoyong, an economic affairs officer at the Investment and Enterprise Division of United Nations (UN) Conference on Trade and Development, described the current situation as "the most severe crisis facing the global economy since World War II."

Recalling the global financial crisis in 2008-2009, which led to a step-down in world economic growth, Liang predicted that the pandemic may lead to a lower level of global economic growth below 2 percent annually.

Meanwhile, extreme poverty is set to rise for the first time in more than two decades, and persistent output losses imply a major setback to living standards versus the pre-pandemic days, the IMF warned in October.

RECOVERY PATH

What path ahead the world economic recovery from the pandemic will follow, a V-shaped one, U-shaped or others, hinges on many factors, including the evolution of the pandemic, trade policies of major economies and the introduction and exit of their stimulus packages, according to analysts.

In Europe and the United States, the economic recovery this summer took a V-shaped path, but with the increase in COVID-19 infections from October onwards, the recovery slowed down, Thiess Petersen, senior adviser at the German Bertelsmann Foundation, told Xinhua.

"A continuation of the V-shaped recovery in 2021 is therefore unlikely," he observed, adding that "the growth of 2021 in the developed economies will not be sufficient to compensate for the slump in 2020, so it will be a slow recovery which looks like the Nike swoosh (logo)."

Meanwhile, Chikahisa Sumi, director of the IMF's Regional Office for Asia and the Pacific, believed the world and the Asia-Pacific region are facing a "long", "unbalanced" and "uncertain" road to recovery.

According to the IMF, world gross domestic product will grow 5.2 percent in 2021, but Sumi said the recovery across the world will be uneven, with a widening gap between developed countries and regions on the one hand and the developing countries on the other.

Asian countries are also emerging from the worst recession in history at different paces. China is set to maintain positive growth this year and expand 8.2 percent next year, while South Korea and Indonesia will return to pre-epidemic levels next year. However, Japan, Singapore, Australia, India and Thailand are likely to recover more slowly, Sumi said.

Liang, the UN official, predicted a V-shaped rebound for next year's world economy. But that stems from a much lower baseline due to the pandemic contraction this year, he explained.

Taking into account domestic and international uncertainties such as debt and financial risks, geopolitical changes and trade disputes, Liang estimated weaker rebounds for mid- and long-term growth, saying it takes time to realize full recovery in U-shaped or W-shaped path in the long run.

CRISIS-BORN HOPE

While the suffocating grasp of COVID-19 choked many economies and businesses around the globe, some have spotted opportunities.

Europe's largest bicycle manufacturer, Portugal, saw a "blessing" in the pandemic as people shun public transport and opt for healthier ways of getting around.

Portugal's production of bicycles jumped 42 percent last year to a record 2.7 million, while head of the Portuguese bicycle manufacturers' association Gil Nadais expected a new record of sales this year, indicating changes in people's mobility habits amid the COVID-19 disruption.

Opportunities can also come from desperately trying of new things.

On Dec. 8, Whatsapp, an instant messaging app with more than 175 million daily active users worldwide, added virtual shopping carts that people can load with purchases. The service said "with more and more shopping happening through chats, we want to make buying and selling even easier."

Additionally, as Brookings researchers said in April, the outbreak is speeding up the trend toward telecommunication, with up to half of American workers working from home during the spring wave of infections, more than double the fraction who worked from home in 2017-2018.

The ascent of digitalization, individual-driven or government-led, is a tip of the iceberg of the changes made by COVID-19.

Ronnie Lins, director of the China-Brazil Center for Research and Business, called the pandemic a catalyst in the course of the Fourth Industrial Revolution, forcing governments to invest heavily in products, services and process innovations.

Facing the pandemic challenges, China has unveiled a "dual-circulation" economic strategy, which helps to create a new export destination for other economies, according to Gu Qingyang, an associate professor at the Lee Kuan Yew School of Public Policy of the National University of Singapore.

"China opens its domestic market and industrial and supply chains to the world by participating in the global circulation system, which will drive the growth of the world economy and play a supporting and pulling role in the post-epidemic recovery," Gu said.

The world economy has seen global supply and demand patterns changing, and the pandemic further accelerated the move, Lins said, stressing that without innovation, cooperation and productivity improvement, no country could prosper in the future with its own resources alone.

The pandemic will end, sooner or later, but challenges facing all the humanity will not be solved in one shot.

Looking into the future, Zhang Tao, deputy managing director of the IMF, said international cooperation is not only the key to beating the pandemic, but also critical for many other issues that the global economy is grappling with, including resolving trade and technology tensions, strengthening the global financial safety net, resolving debt crises, and addressing climate change and inequality.

"We need to grasp the opportunity of getting out of the pandemic to shape an economy of the future that is greener, digital and more inclusive," Zhang has said. Enditem

(Xinhua reporters Ye Shan, Liu Chunyan in Tokyo, Chen Weihua, Zhao Yan in Rio de Janeiro, Zhu Sheng in Berlin, and Ling Xin in Geneva also contributed to this story.)

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