As the world has become more interconnected various economies have also become more dependent on each other. Globalization has allowed the establishment of a world economy to take place. Globalization has allowed struggling countries to improve through free trade. In this environment technology and ideas are spreading as fast as the speed of light.
The unfortunate outbreak of COVID-19 is testing the resiliency of the world economy. With many of the world economy’s key players still recovering from the 2008 recession and political unrest currently taking place, saving the world economy may prove to be a challenge. The V-shaped recovery that many were hoping for seems unlikely. A quick recovery for the world economy will require more than China to bring the world economy back from record unemployment and lack of consumer spending. Based on the status of the world’s top economies, based on their GPD, here is how the world’s economic recovery is going.
The United States is now starting to slowly reopen. Consumer spending is slowly increasing as restaurants and malls begin to open again. Stimulus passed by the U.S government seems to be keeping things afloat. Unemployment fell to 13..3%, down from 14.70. The threat of a second wave of cover-19 and political unrest in the U.S threatens the countries recovery. A slow and painful recovery is expected for the U.S if all goes well.
For the moment business activity in china has sharply rebounded. The PMI index is up to 55.0. A rise from a PMI index of 44.4 in April. Export activity is still slow, due to the fact that most of the world’s economies are still recovering. Although domestic demand seems to be increasing, small businesses and migrant workers are still suffering. Unemployment is expected to continue to increase during the second quarter, as small businesses continue to close and businesses continue to cut costs.
Japan’s economy has contracted for the last two quarters. To keep Japan’s economy afloat the government is passing spending plans to keep business open. While some of Japan’s businesses have opened, a large percentage of the country continues to be locked down.
Germany has plans to roll out a stimulus package worth $146 billion. The stimulus package includes plans to reduce the value-added tax and will provide families with an extra $300 per child. The German economy was on the brink of a recession at the end of 2019. At the beginning of 2020, the German economy officially entered into a recession. Covid-19 has hit the German economy hard. Although, compared to other places in Europe like Italy and France the german economy is doing well.
The Indian economy has managed to avoid a recession, but the Indian economy could be in a recession by the third quarter. The government and the Reserve Bank of India have taken steps to save the Country’s economy. The stimulus package created by the Indian government focuses on the supply side, but demand is needed to match this supply. If the stimulus package Created by the Indian government isn’t implemented properly the country will enter a recession in the third quarter for sure.
As the UK was put under lockdown due to COVID-19 the economy plummeted. The UK experience record Unemployment and consumption rates. The UK economy seemed to be picking up in May. The Stimulus spending will help keep unemployment numbers down until the U.K can fully reopen.
France Italy and Spain economies were hit the hardest in Europe as a result of COVID-19. France implemented some of the toughest lockdown procedures resulting in the economy coming to a sudden stop. France began to slowly reopen on May 11th. The French government plans To avoid raising taxes to pay for the country’s’ COVID-19 Expenses.
Brazil suffered from one of the worst COVID-19 outbreaks with nearly 615,000 confirmed cases. The government’s handling of the COVID-19 outbreak has resulted in unrest in the country.
The PMI index for Italy is up from a record low of 31.1 to 45.4. The Italian Economy is beginning to partially reopen. Demand for exports continues to shrink as the European Union continues to try and bounce back from the COVID-19. Costs in Italy continue to shrink as oil prices have been reduced and companies continue to reduce prices to attract clients.
Canada’s economy is slowly reopening. Consumer spending has started to increase as economists and consumers remain hopeful that the economy will bounce back. Unemployment was all the way up to 13% as a result of the COVID-19 outbreak. New jobs were being created in May, but the job reported has not been released yet. For now, the Canadian economy seems to be on a slow smooth recovery path.
For now, the full effect of COVID-19 on the world economy is unable to be felt. Most of the world’s economies are just starting to reopen. Although stimulus packages are being passed in order to keep the world’s economies afloat, there is no proof that these stimulus packages will work. The stimulus packages could simply be delaying the inevitable. With most of the world’s economies already in record debt, there is no telling what would happen if market confidence is lost. The world economy debt currently exceeds $200 trillion. The world economy appears to be on the brink of bankruptcy and COVID-19 outbreaks are still a threat. For the moment there is no telling how badly the world economy will be damaged.