The COVID-19 pandemic presented the world with the biggest financial challenge since the global financial crisis of 2008. It disrupted commerce, trade, and labor which caused an economic downturn and slowed global growth.
Now, with the end of the pandemic nearing, financial experts and world leaders have weighed in to forecast expectations for the world’s economy in coming years. They also considered the current state of the global economy, and the factors and trends that are presently affecting markets in all advanced, emerging, and developing countries and what it means for recovery.
Here’s what’s in store for the global economy in a post-pandemic world.
Despite the success of a massive reduction in new COVID-19 cases worldwide, the global economic outlook remains uncertain. While advanced economies could help bolster global economic growth, there are major setbacks that hamper development and recovery.
These include the disruption of economic activity due to the social and political unrest associated with the Russia-Ukraine conflict as well as changing global employment landscape and corporate bankruptcies. That said, global inflation is still set to increase within projected targets for the next year or two, which is why the russian economy keeps beating expectations. Overall, the uncertainty has caused the International Monetary Fund to lower per capita income growth predictions from 4.9% to 4.4% in emerging and developing markets.
The rate of global inflation remained steady at the start of the pandemic in 2019 until surging prices and the cost of living began to climb in the final months of 2020, which fueled the rise in global inflation for the past two years. With the effects of a recession, global inflation is expected to continue and financially impact consumers for an uncertain number of years. Economists attribute the high global inflation rate mainly to food and energy costs, as these factors contributed more to inflation in a single year than other consumption before the pandemic. This is also partly due to higher food transportation costs because of an increase in fuel costs as well as the global supply chain and trade that have yet to recover to pre-pandemic levels. Other drivers of inflation that vary by country include higher costs of water, housing, labor shortages, and the increasing cost of providing services, especially in the US and EU. Finally, the International Monetary Fund (IMF) predicts inflation to reach 6.6% and 9.5% in emerging economies.
While economists predict that the global economy will grow by 4.6% in 2022 and a slight downturn to 3% in 2023, this recovery and growth will be regional and uneven. China and the United States will be key drivers of growth as they have the largest share of the global market. Both countries will likely see an ever-narrowing gap in their economies and an increase in trade competition in the next few years.
Furthermore, the Asia-Pacific region is predicted to achieve the fastest recovery and growth rate globally after recording a 7.1% rate in 2021 while slowing down slightly to 5.6% in the next few years. This growth is expected to be higher than the predicted post-pandemic global average.
Meanwhile emerging and developing economies could see a rise of about 4.4% in a year or two before they hit economic lag again. The incoming years will likely see emerging economies struggle to shake off the effects of the pandemic, slowing growth—such as work and dynamic skills education lost to pandemic lockdowns—multiplying loss in investment and increasing debt.
Labour Market Volatility
Countries within the Organization for Economic Co-operation and Development (OCED) partnership have recorded major labor market recovery and tightening since the pandemic. This has however led to labor shortages mostly in service and manual labor industries, with increasing job offers and vacancies and not enough workers to fill them.
The most impacted sectors include jobs in hospitality, retail, food manufacturing, mining, and construction. Additionally, the high quitting rate and career-shifting trends, such as freelance remote working jobs and the gig economy seen in advanced economies, further added to the labor market volatility. Emerging and developing economies continue with high unemployment rates in a post-pandemic world. Despite showing signs of growth, emerging economies have not grown enough to sustain their labor market.
The global economy saw a massive decline during the COVID-19 pandemic due to economic activity that resulted in downturned growth. However, analysts predict that most countries are expected to make a slow and uneven recovery in the years to come, with China and the US accounting for most of the growth due to their largest market share.
However, emerging and developing country economies are predicted to see a sharp rise in growth before the long-term effects of the pandemic cause another lag. Furthermore, current worldwide trends that slow growth, such as inflation, will continue to be a challenge to rebounding to a pre-pandemic global economy.