Amid the covid-19 pandemic, Steve Schifferes, an economist at the University of London, projects which countries will perform better economically and which ones will lag behind.
The world’s Gross Domestic Product (GDP) suffered its sharpest fall in 2020 since the end of World War II. Millions were left unemployed or their jobs suspended, and governments injected billions of dollars into their economies to prevent further damage.
However, the recovery to 2021 is highly uncertain. China’s economy is growing strongly again, but many of the world’s richest nations may not make a full recovery until 2022, considering an early estimate.
The inequality is also rampant. While the 651 American billionaires have increased their net worth by 30% to $ 4 trillion, 250 million people in developing countries could face absolute poverty and as much as half of the world’s workforce may have lost their means to survive.
The speed at which the pandemic can be contained will greatly influence the performance of the economy around the world.
In the race between new strains of the virus and vaccines, an early victory is by no means assured.
Even wealthy countries that have bought the most available vaccines may fail to inoculate enough people to build herd immunity by the end of 2021.
In developing countries, where vaccines are generally in short supply, the virus is expected to spread further.
The big winners are likely to be countries like China and South Korea, which managed to suppress covid-19 early. China’s economy is projected to grow 8% in 2021, more than twice that of the most successful Western countries even before the pandemic.
China’s economy, driven by its exports, has benefited from lockdowns in western countries.
Western demand for services like entertainment and travel may have decreased, but the demand for household consumer goods and medical supplies has increased.
And Chinese exports to the US have reached record levels despite high tariffs imposed by the Trump administration.
China is also expanding its economic influence throughout Asia, with a new free trade zone in the Pacific and huge infrastructure projects along its trade routes to Europe and Africa.
It is investing in advanced technologies to reduce its reliance on Western supply chains for components such as semiconductors.
China could overtake the United States as the world’s largest economy in five years, twice as fast as previously predicted.
For rich countries such as the United States, the United Kingdom, and continental Europe, the outlook is less rosy.
After brief recoveries in the summer of 2020, their economies stalled. This was driven by both the second wave of the pandemic and the lockdowns.
In the US, for example, jobs and growth closely followed the evolution of the pandemic, more so than locks applied unevenly as business and consumer confidence plummeted.
Nor can they afford the huge government subsidies that have prevented mass unemployment in Europe and the United States.
And with demand for their raw materials paralyzed by the recession in the West and little help available from rich countries to ease their huge debts, they can’t afford any further lockdowns.
Even fast-growing countries like Brazil, India, and South Africa face tough times.
For example, South Africa does not qualify to receive COVAX vaccines for very poor countries, but is not in a position to buy any vaccines on the commercial market, despite producing them locally for Western pharmaceutical companies.
Previously, those countries had a growing middle class; now many millions of working poor will be forced to return to their villages and urban slums due to lack of job opportunities, facing massive poverty and even hunger.
The new division
The economic effects of the pandemic have been enormously varied in society.
Those who work full-time, often in high-paying jobs that they can do from home, have accumulated substantial savings, given that there are fewer possibilities to spend wages.
The very wealthy, especially in the United States, have benefited from huge stock market rallies driven by hits during the pandemic, such as Amazon, Netflix and Zoom, and this trend is likely to continue.
The big question for the economy is whether in the coming year those with secure jobs and high incomes will revert to their previous spending patterns, or will they keep their savings in the face of continued uncertainty.
In contrast, many of those who have lost jobs or businesses or been laid off will find it difficult to find a new job or return to their previous income levels, especially as low-wage sectors – such as retail are unlikely to and hospitality – make a full recovery after the pandemic.
This group includes many young people, women, and ethnic minorities.
Inequality could increase as wealthy governments reduce the huge subsidies they have applied to keep many workers employed or with the contract suspended.
Rishi Sunak, the UK Chancellor, gave clear signals of this intention in his November spending review.
In the US, the political stalemate over extra aid spending was only resolved at the last minute, and Republicans will now likely try to minimize spending from the Biden administration despite the huge spending of the Trump years.
Europe has just reached an unprecedented agreement to provide European Union-funded aid to member states hardest hit by the pandemic, but tensions over the scope of the package and recipients are likely to continue.
Cooperation could facilitate adaptation to a post-pandemic world. But international cooperation during the pandemic has been weak, and economic tensions have further undermined the global commitment to free trade, not a good start for Brexit in Britain.
Nationally, the redistribution of wealth and income through higher taxes could give Western governments more resources to deal with the victims of the pandemic, but it will be politically difficult in an ongoing recession.
Social unrest has been a consequence of previous pandemics. Hopefully this time we find the wisdom to address the great inequalities revealed by covid-19 and build a fairer world.