The impact of the COVID 19 pandemic on the global economy

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16, 25, 22, 43, 828, 932, 1130, 2421, 3537, 4423. These are not just numbers, this is the number of people infected with coronavirus. In Croatia. While some devise conspiracy theories, others count the infected, the dead, and recover, and the world stands still, jobs and events are postponed, people distance themselves from each other, the world economy is going through the hardest days

The wet market in Wuhan has affected not only the PRC and its economy but the economies of countries from all continents. From all over the world. World stock markets face losses of major indices of more than 25%.

After the end of the first wave of the pandemic, we all hoped that the end had come, but today we are writing this article under masks and at a sufficient social distance from our colleagues.

According to the World Bank, the economic crisis caused by the pandemic will affect emerging markets and emerging economies over several quarters due to pressures on weak health systems, losses in trade and tourism, slowing remittances, reduced capital flows and tighter financial conditions due to rising debt.

The consequences of this pandemic are not only felt by small and medium-sized enterprises, they are not immune to globally known and successful companies such as:
  • Coca Cola has stopped its marketing activities across Europe
  • Volkswagen and Ferrari have suspended production in Europe
  • Airlines declare bankrupt or are on the verge of bankruptcy
  • The NBA, football leagues and Formula 1 have been suspended until further notice
  • Luxury goods companies, such as Hermes, are closing their product plants
  • McDonald’s closes the seating area in the US
  • Media houses and televisions record significant losses from advertisements
Many sectors around the world are feeling the horrible consequences of this pandemic:
  • Tourism has been brought to its knees
  • Fairs and events are canceled
  • Sports events, including the Olympic Games in Tokyo, have been postponed to 2021
  • Entertainment and film industry on the verge of collapse – for example, the Canadian cinema chain Cineplexx has closed 165 branches (for now)
  • Millions of people are losing their jobs
  • Health systems are overloaded

Croatian analyst Žarko Primorac points out that the world economy is globalized, which means that business ties between countries in the world are very dense, and thus the communication of people, goods and commodities, so every sudden ‘blow’ has an impact on the whole world.

In 2020, Croatia is projected to fall in the economy by 9.2%, so experts are not too comforted by the forecast that in 2021, growth of 5.2% should be felt. A return to the situation from 2019 is therefore not achievable in the foreseeable future. These predictions come from the chief economists of Croatia’s four largest banks as part of a recently published HUB analysis.

A better fate is not expected, according to the European Commission’s summer forecasts, nor for the entire euro area, which could record a decline in GDP of 8.7% this year, and growth of 6.1% in 2021. The return to 2019 levels has therefore been postponed to 2022.

Similar differences, as noted in the analysis, are expected in the global economy. Namely, based on the IMF’s summer revision of economic expectations, the expected rate of decline for the United States is 8%, while the expected rate of growth is 4.5% in 2021. China, on the other hand, should already feel growth of 1% in 2020, and a significant 8.2% would mark 2021.

Either way, it is difficult to talk about the final impact of the pandemic because its time is still going on and it is shrouded in uncertainty. Estimates of future economic trends are changing from day to day, as are the number of people infected and dying in individual countries and the measures being introduced around the world. The global economic recession is an unquestionable and inevitable prediction, and some experts fear it could be similar to that of 1929, with differences in estimates of the duration. Predictions, however, are only predictions, and we have no choice but to monitor the situation and hope for a better tommorow.

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