The COVID-19 Pandemic and the Future of the Global Economy

Based on the original paper by Dr. David L. Blond, Principle Researcher and President, QuERI-International.

In a world where the policy responses to COVID-19 vary from indifference to economic shut-ins for weeks and months at a time, the result is an economic reality that feels akin to wartime disruption.

The nature of the COVID-19 disruption is utterly unique. Some sectors of the economy are closed down or severely restricted while others are left to work as they see fit. Because of interlinkages between economies, only a modeling system capable of allowing for the interindustry links as well as global linkages to manage some of the impacts and assumptions outside of economic factors can offer the possibility of projecting the economic effects.

Quantitative Economic Research International (QuERI) offers one such model, with a sector specific approach that may be better suited to analyzing the effect of a government induced shutdown and reopening of economies. General adjustment factors in the QuERI model are developed based on the degree of virus and the stage of development to disturb the model’s baseline (December, 2019) result.

Below we consider the long-term effects of the COVID-19 pandemic through a macroeconomic lens, including adjustments to gross domestic product, private consumption, business investment, government expenditures, exports and imports, as well as financial variables, including prices, exchange rates, and interest rates.

The Pandemic is a Unique, Partially Self-Inflicted Economic Event

If not for the pandemic, the world economy of 2017 was on course to grow by more than 34% by 2030. QuERI model’s estimates show that in the post-COVID scenario by 2030 the world economy is now expected to increase by 29.8% compared to 2017.

Economic Drivers of Global Growth and Development in the Next Decade

Consumption was the primary driver of economic growth for advanced economies between 1990 and 2000. That’s about to change. The rebalancing of economic drivers in emerging markets will be the most important macroeconomic event of the next decade.

Global Trade Imbalances Will Remain

The data suggests trade imbalances will grow and the world trading system will remain a risk to the long term stability of world order.

Massive surpluses on the part of Germany, the Netherlands, Japan, and even Italy will only lead other countries to question the benefits of low tariffs and open borders.

Looking ahead, based on the mix of industries and the QuERI model’s global allocation of supply and demand:

• Italy runs a growing surplus within the advanced country group,
• The United States remains a major importer and deficit trade country,
• China slides into deficit with the other emerging markets trending slightly positive, and
• Developing countries remain in deficit territory.

View original infographics, live dashboard, and download data at knoema.com