Global Economy under the New Mutated Variants of Covid-19

The global outlook remains surrounded by a great deal of uncertainty, more than a year and a half (December 1, 2019, according to the World Health Organization) after the outbreak of the pandemic and the emergence of new mutated virus strains. Huge human losses and economic crises, contrary to the reports of the World Bank and the International Monetary Fund for the year 2021, which indicate a positive growth between 6% and 4.4% (IMF) or 4% (WB) of the global GDP based on the effectiveness of the vaccine and its equitable distribution, the assistance of developed countries to emerging and developing countries, and compliance with the warnings of the World Health Organization, which urges countries not to “waste the gains” by lifting COVID restrictions prematurely.

At a time when vaccination rates are increasing, which gives rise to a feeling of optimism and hope, there is still a divergence in the paths of economic recovery between countries and basic sectors, the extent of support and economic policies to confront the virus and the equitable distribution of vaccines with the continued adaptation of economic activity to the requirements of limited mobility, in connection with the course of the pandemic, and the effectiveness of support policies in providing a bridge towards restoring normal conditions depending on the availability of vaccines, and the evolution of financial conditions.

After the economy contracted in 2020, 3.3% according to the International Monetary Fund and 4.3% according to the World Bank of global GDP with the only positive growth for China of 2.3% according to the IMF and 2% according to the WB. The exceptional support provided by the policies prevented worse economic scenarios from occurring, and after more than a year since the pandemic, there is a way out that is becoming increasingly clear in light of this crisis, because the strength and ability of recovery will depend primarily on the speed of spreading the vaccine to defeat the epidemic and avoid random vaccination within countries and maintaining social distancing, awareness and guidance, and working to ensure that the level of income per capita does not decrease.

According to World Bank Group President David Malpass, the global economy has entered a weak recovery phase, because policy makers face huge challenges, whether in public health, debt management, budget policy, central bank activities and structural reforms, as they seek to ensure a global recovery, which is still fragile and weak, and is not fit to establish strong economic growth and overcome the effects of the pandemic, despite spending over $160 billion over a 15-month period ending in June 2021, helping more than 100 countries protect the poor and disadvantaged, support businesses, and promote economic recovery, this includes $59 billion in new IDA resources through grants and highly concessional loans and $12 billion for developing countries to fund the purchase and distribution of coronavirus vaccines.

But fear prevails, due to the mysterious path of the pandemic and the emergence of the Indian and British mutated strains that could paralyze basic sectors such as transportation, which will negatively affect the countries with many trips, especially the Gulf Cooperation Council countries, which suffered from negative GDP growth of 6% according to the International Monetary Fund, and fear of the impact of mutated strains on the 2022 World Cup in Qatar. Will the weak recovery in the economy and positive growth prospects for 2021-2022 turn into negative growth in the fourth quarter of 2021 and the first quarter of 2022, especially after the World Health Organization’s warnings to maintain the gains. Policy makers moved to curb the pandemic and implement reforms to boost investments in order to reach an improvement scenario index to positive global growth of 4% to 5% in the best cases and the worst-case scenario indicator to positive global growth of 1.6% for the year 2021 according to the International Monetary Fund After a global contraction of 4.3% for the year 2020, according to the World Bank.

Policy makers must curb the pandemic, restore the rapid economic movement and distribute the vaccine, and work on a rapid economic recovery to restore factories and businesses in developed countries in a quick manner after vaccination, because everyone deserves a fair chance in vaccination, which will lead to a significant increase in global growth, which will add 9 trillion dollars to the total output Global domestic debt by 2025. Now low-income countries need to grant debt relief under the HIPC program launched in 1996 and to design the comprehensive approach to debt reduction involving the International Monetary Fund and the World Bank in such a way that no poor country faces an unmanageable debt burden.

So far, debt-reduction packages have been approved for 37 countries under the Heavily Indebted Poor Countries Initiative, 31 of which are in Africa, allowing gradual debt-service relief of $76 billion, so that it does not lag behind other countries, or else millions will be in debt. Otherwise, millions will be at risk of falling again into extreme poverty, knowing that before the outbreak of the pandemic, the number reached 690 million people, or nearly 9% of the world’s population, suffering from hunger and destitution, after the Food and Agriculture Organization Food Price Index recorded the fastest monthly increase. The average food price index reached 127.1 points in May, up 4.8% from its level in April, and 39.7% from its level in May 2020, so governments must help vulnerable groups, cooperate across borders and continue in a green and digital future with continued support throughout the recovery.

Mohamad Zreik
Mohamad Zreik
Mohamad Zreik is an independent researcher, doctor of international relations. His areas of research interests are related to the Foreign Policy of China, Belt and Road Initiative, Middle Eastern Studies, China-Arab relations, East Asian Affairs, Geopolitics of Eurasia, and Political Economy. Mohamad has many studies and articles published in high ranked journals and well-known international newspapers. His writings have been translated into many languages, including French, Arabic, Spanish, German, Albanian, Russian, Bosnian, Bulgarian, etc.