The rapid global spread of the COVID-19 has demonstrated that no matter how successful America is at fighting this pandemic here at home, we will never stop this threat unless we’re also fighting it around the world. In this series of issue briefs, the USGLC takes an in depth look at the global response and COVID-19’s impacts on vulnerable populations, global development and diplomacy, and the future of U.S. global leadership. Read more from our series here.

Last updated August 12, 2021

The failure to control the COVID-19 pandemic has had far reaching impacts on the global economy, with global GDP falling by 3.3 percent in 2020. Even with the global economy projected to grow by 6 percent in 2021, recovery will depend on equitable distribution of the vaccine globally. Failure to do so could cost the world economy up to $9 trillion, according to the International Chamber of Commerce, with the costs born equally by wealthy and poor countries, causing more economic devastation than the 2008 financial crisis.

  • The COVID-19 pandemic erased the equivalent of 255 million jobs in 2020, losses were particularly high in Latin America and the Caribbean, Southern Europe and Southern Asia.

The global economic downturn is having a disproportionate impact on low-income and emerging economies. They will take the hardest hit, according to Kristalina Georgieva, Managing Director of the International Monetary Fund, as they have “less resources to protect themselves against this dual…health and economic crisis.” World Bank President David Malpass also warned that the global recession could set back decades of progress in low-income countries, stating that the COVID-19 pandemic would lead to higher infant mortality rates and stunted growth for children.

  • The United Nations Development Programme (UNDP) projects that developing economies will lose at least $220 billion in income.
  • An additional 95 million people are expected to have entered the ranks of the extreme poor in 2020 (80 million more undernourished than before) due to the average annual loss in per capita GDP, says the IMF.
  • An additional 207 million people could be pushed into extreme poverty by 2030, due to the severe long-term impact of the coronavirus pandemic, bringing the total number to more than a billion, according to a new study from the UNDP.

Failure to Distribute Vaccines Around the World

Vaccine access has emerged as the leading determinate of global economic recovery, particularly for low-income and emerging economies.

  • Low-income countries would add $38 billion to their GDP forecast for 2021 if they had the same vaccination rate as high income countries.

Rand Corporation estimates changes in real annual GDP for four scenarios:
Graph from Rand Corporation

Differences in ongoing financial support are degrading economic growth and recovery prospects for low-income countries.

Regional Assessments

  • The World Bank reports that sub-Saharan Africa experienced its first economic recession in 25 years, with the economy declining by 2.0 percent in 2020. Growth in the region is forecast to rise to between 2.3 – 3.4 percent in 2021.
  • For the first time in 60 years, East Asia’s economic growth stalled – growing by a mere 1.2 percent in 2020 – and the pandemic could drive 19 million people into poverty.
  • Latin America and the Caribbean experienced the worst economic contraction in the region’s history with the economy declining by 6.7 percent in 2020, with expected growth by 4.4 percent in 2021. Unemployment is expected to reach 13.5 percent, the economic downturn could push 28 million people into extreme poverty.

Foreign direct investment flows – a critical source of financing for emerging and developing economies – fell by 42 percent in 2020, with expectations FDI will remain weak due to pandemic related uncertainty. Low-income countries saw more than $100 billion flowing out from the region in early 2020 – more than three times the amount during the global financial crisis. The dramatic capital outflow led to major emerging market currencies depreciating by 15 percent and forcing people to pay more for imported goods. UNCTAD projects a 5-10% FDI slide in 2021.

  • Low-income countries debt burden may soar to between $2.6 trillion and $3.4 trillion over the next two years, according to UNCTAD. A significant share of low-income country’s public debt is mainly in U.S. dollars, the depreciation makes it difficult to pay their debts.

The World Bank is providing $160 billion in financing – the largest response in its history – to help 100 low-income countries respond to the health, economic and social impacts of COVID-19, including $50 billion of resources on grant and highly concessional terms, and $20 billion for vaccine purchase and distribution.

  • Of the 100 countries supported by the World Bank, 39 are in Sub-Saharan Africa and nearly one-third of the total projects are in fragile and conflict-affected situations.
  • The IMF has provided emergency financing to 85 countries, and also approved immediate debt relief to 29 low-income countries, totaling nearly $500 million.

 

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