While the world may be going through one of the worst pandemics in biology and the environment, the economy has not been left unscathed. The Covid-19 recession is an ongoing economic crisis as a result of the Covid-19 pandemic. It may not seem possible but the recession has been cited to be the world’s worst global economic crisis since the Great Depression. This article seeks to break down this economic event into a digestible read so that you can understand one of the world’s greatest economic events.
What Were The Causes Of The Covid-19 Economic Recession?
- The most obvious and blatant cause can be cited to be the Covid-19 pandemic. This was an outbreak that began in a small city in China and has now spread to all nations in the world, having killed hundreds of millions in the process. The pandemic led to a severe economic disruption. It resulted in the cancellation of large economic events such as political and cultural events, a widespread shortage of essential items worsened by panic-buying, cancellation of non-essential travelling, etc. Schools, universities and workplaces have all been closed as a result. This pandemic has dented every major industry negatively and is one of the greatest causes for the stock market crash (where there was a sudden global stock market plummet in early 2020).
- As a result of the pandemic, the largest economic cause of the recession was lockdowns. These lockdowns, imposed by stay-at-home orders, caused many businesses (specifically in-person B2C businesses like restraints, retail stores, entertainment venues) to shut down. Individuals began to change their spending habits by hoarding goods, reducing spending, and hence, affecting big and small businesses. According to a study in 2021, only 7% of the decline in economic activity resulted from government policies that prohibited such activity. The rest of the decline was due to consumers voluntarily stopping spending.
- A cause that often goes unnoticed is the Russia-Saudi Arabia oil price war. The pandemic significantly impacted the oil demand and the prices of oil began to plummet. Russia and the OPEC could not agree on production cuts, and Russia and Saudi Arabia engaged in pricing and supply wars over oil production.
These causes resulted in a global coronavirus recession. Both advanced and emerging economies were deeply impacted by the pandemic, as shown in the graph below. In 2020, the GDP was rattled and rolled by the pandemic. Many nations are predicted to not see recovery up until 2025.
It would be ideal if this article could be wrapped up with the end of this recession. However, even BiteSizEconomics cannot predict the future in such unprecedented times. However, it is admirable to see how the world is growing and coming together in communities. Support your local businesses and stay united in these uncertain times.