The economic slowdown has been a significant concern since the 2008 crash. The US housing bubble burst in late 2008, and the entire world went into recession. The world economy came back up in a couple of years, but the graph has not been linear.
The 2019 COVID-19 pandemic shocked the world and destroyed institutions. Death was prevalent and overwhelming, the world had to go into lockdown multiple times, and the majority of the working class were out of jobs. The global economy, in simple terms, is the purchasing power at the moment. If people can spend on products and services, the economy booms.
Will 2022 be different, and will the economy be returned to normal? We will discuss further but first, let’s understand what normal looked like before the pandemic.
2016 was not a good year for the world economy, and the growth plateaued mid-year. Experts predicted the succeeding year would be different and expected a good run in emerging markets and developing economies like India.
By April 2017, the forecasts looked good, and the market was on an upswing. Global economic activity picked up with a long-awaited cyclical recovery in investment, manufacturing, and trade, according to Chapter 1 of this World Economic Outlook.
According to the numbers, the economic growth was expected to grow from 3.1 per cent in 2016 to 3.6 per cent in 2017. By the end of 2017, it was clear that the global economy was on the rise and the projected 3.5 per cent growth hit a staggering 3.6 per cent. To everyone’s surprise, the developing countries like Japan, emerging Asia, emerging Europe, and Russia grew exponentially. Developed economies like the United States of America and the United Kingdom brought the global average down. While the baseline outlook was strengthening, growth remained weak in many countries, and inflation is below target in most advanced economies.
Global growth was projected to reach 3.9 per cent in 2018 and 2019, in line with the April 2018 World Economic Outlook (WEO) forecast. Although the reality was that the emerging markets did not perform as expected, developed economies levelled off abruptly, which affected the projections tremendously. The initial forecast of 3.9 per cent growth in 2018 was capped off at 3.7 per cent by the end of the year.
The Current Scenario
The onset of the COVID-19 pandemic hurt the economy to the extent that it was projected to go lower than the 2008 crash. Global growth was projected at 4.9 per cent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic had a more negative impact on activity in the first half of 2020 than anticipated.
By the end of 2020, the economic growth saw some relief, and the hopes were high Multiple government reforms and lowered interest rates helped people spend more and get out of the trenches. The emerging markets were still struggling but not drowning, which was a good thing by comparison. Developed economies, especially the USA, grew by a small margin due to financial aid and new legislation.
The future is still uncertain yet optimistic. Economists hope that the momentum continues and stabilizes the economy. One major factor affecting the growth is that even though consumers are buying more goods, the service industry is still battling the economic downfall. If the service industry receives an influx of cash, 2022 might be salvaged.