Economic Loss Essay
Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent.
economic loss essay
This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.
Flattening the spread of COVID-19 using lockdowns allows health systems to cope with the disease, which then permits a resumption of economic activity. In this sense, there is no trade-off between saving lives and saving livelihoods. Countries should continue to spend generously on their health systems, perform widespread testing, and refrain from trade restrictions on medical supplies. A global effort must ensure that when therapies and vaccines are developed both rich and poor nations alike have immediate access.
Multilateral cooperation is vital to the health of the global recovery. To support needed spending in developing countries, bilateral creditors and international financial institutions should provide concessional financing, grants, and debt relief. The activation and establishment of swap lines between major central banks has helped ease shortages in international liquidity, and may need to be expanded to more economies. Collaborative effort is needed to ensure that the world does not de-globalize, so the recovery is not damaged by further losses to productivity.
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A startling indicator of the economic impact of COVID-19 is that unemployment rates reached the highest level since the Great Depression in April. As a result, claims for unemployment benefits have risen dramatically, though millions of people who have lost their jobs have been unable to apply or have had trouble applying for this benefit. Yet these figures do not reveal the extent to which households are struggling financially as a result of a COVID-19 related job loss.
However, these job and income losses were not experienced equally. Hispanic, low-income, and young individuals (between the ages of 18 and 24) had the highest rates of job and income loss compared to other racial/ethnic, income, and age groups, as reflected in the charts below.
Households that experienced a COVID-19-related job or income loss were two to three times more likely to experience economic hardship than those who did not experience a loss, with all of these differences being statistically significant (p
Survey respondents were also asked whether COVID-19 has made it hard to afford food for the adults and children in their households. Again, COVID-19 job and income loss is a significant factor. Households experiencing a job or income loss were more than twice as likely to have a hard time paying for food for adults, after controlling for income, age, gender, and household size (Figure 5).
These survey findings illustrate that the economic pain of families who have lost jobs or income due to COVID-19 is very real. These findings look beyond the official unemployment and job loss figures to see just how affected families are struggling. These findings are particularly notable given that the survey administered by Social Policy Institute was conducted early in the pandemic (April 2020) and is the first of several waves administered every three months in 2020.
The hardships presented here have many negative consequences for households. Difficulty paying rent puts households and families at risk for eviction, especially when eviction moratoria some municipalities implemented expire and households struggle to pay back-due rent. The negative downstream effects of eviction are varied and far-reaching: loss of possessions, disruptive school changes, loss of friends for children, and mental health distress just to name a few.
The health consequences of food insecurity are far-reaching. Among children, consequences include birth defects, anemia, asthma, and cognitive, behavioral, and mental health problems. Compounding these issues, individuals may put off medical care or avoid filling prescriptions as a result of the high cost and loss of income. These individuals jeopardize their health, especially if they have serious or chronic illnesses.
The federal Coronavirus Aid, Relief, & Economic Security (CARES) Act signed into law in late March 2020 includes various provisions that ought to help many struggling families, including extended unemployment benefits and economic impact payments. However, CARES Act limitations calling for additional policy responses remain:
COVID-19 is not only a global pandemic and public health crisis; it has also severely affected the global economy and financial markets. Significant reductions in income, a rise in unemployment, and disruptions in the transportation, service, and manufacturing industries are among the consequences of the disease mitigation measures that have been implemented in many countries. It has become clear that most governments in the world underestimated the risks of rapid COVID-19 spread and were mostly reactive in their crisis response. As disease outbreaks are not likely to disappear in the near future, proactive international actions are required to not only save lives but also protect economic prosperity.
A recent report examined how climate change could affect 22 different sectors of the economy under two different scenarios: if global temperatures rose 2.8 C from pre-industrial levels by 2100, and if they increased by 4.5 C. The study projected that if the higher-temperature scenario prevails, climate change impacts on these 22 sectors could cost the U.S. $520 billion each year. If we can keep to 2.8 C, it would cost $224 billion less. In any case, the U.S. stands to suffer large economic losses due to climate change, second only to India, according to another study.
We are already seeing the economic impacts of the changing climate. According to Morgan Stanley, climate disasters have cost North America $415 billion in the last three years, much of that due to wildfires and hurricanes.
If temperatures rise 4.5 C by 2090, 9,300 more people will die in American cities due to the rising heat. The annual losses associated with extreme temperature-related deaths alone are projected to be $140 billion.
Temperature extremes are also projected to cause the loss of two billion labor hours each year by 2090, resulting in $160 billion of lost wages. Because of heat exposure, productivity in the Southeast and Southern Great Plains regions is expected to decline by 3 percent, and some counties of Texas and Florida could lose more than 6 percent of labor hours each year by 2100. According to a 2014 Rhodium Group study, the largest climate change-related economic losses in the U.S. will be from lost labor productivity.
Last year, the United States Hispanic Chamber of Commerce and the George W. Bush Institute partnered to release this book containing an in-depth analysis of the correlation between immigration and economic growth.
Emerging market and developing economies will be buffeted by economic headwinds from multiple quarters: pressure on weak health care systems, loss of trade and tourism, dwindling remittances, subdued capital flows, and tight financial conditions amid mounting debt. Exporters of energy or industrial commodities will be particularly hard hit. Demand for metals and transport-related commodities such as rubber and platinum used for vehicle parts has also tumbled. While agriculture markets are well supplied globally, trade restrictions and supply chain disruptions could yet raise food security issues in some places.
Looking at the speed with which the crisis has overtaken the global economy may provide a clue to how deep the recession will be. The sharp pace of global growth forecast downgrades points to the possibility of yet further downward revisions and the need for additional action by policymakers in coming months to support economic activity.
A particularly concerning aspect of the outlook is the humanitarian and economic toll the global recession will take on economies with extensive informal sectors that make up an estimated one-third of the GDP and about 70% of total employment in emerging market and developing economies. Policymakers must consider innovative measures to deliver income support to these workers and credit support to these businesses.
Another important feature of the current landscape is the historic collapse in oil demand and oil prices. Low oil prices are likely to provide, at best, temporary initial support to growth once restrictions to economic activity are lifted. However, even after demand recovers, adverse impacts on energy exporters may outweigh any benefits to activity in energy importers. In addition, the recent oil price plunge may provide further momentum to undertake energy subsidy reforms and deepen them once the immediate health crisis subsides.
In the face of this disquieting outlook, the immediate priority for policymakers is to address the health crisis and contain the short-term economic damage. Over the longer term, authorities need to undertake comprehensive reform programs to improve the fundamental drivers of economic growth once the crisis lifts. 350c69d7ab