With war and other shocks, pandemic loses prominence on the world economic agenda

The dozens of items on the public agenda for the annual meetings of the World Bank and the IMF (International Monetary Fund) this week include several sessions on climate change, food security and other chronic world issues, some on inflation and trade, and also attention to inclusion. economy and digital currencies.

Relatively absent, the Covid-19 pandemic, a once-in-a-century crisis that has killed an estimated 6.5 million people since late 2019 and highlighted broad weaknesses in the way the global economy is organized, will be addressed directly in a single panel. on readiness and another two on issues related to economic recovery.

With the world fractured by the Ukrainian War, shocks in the prices of commoditiespossible recession, financial market stress and a move towards deglobalization, the persistent health crisis that triggered or accelerated many of these problems – and kept international institutions together virtually until recently – has now faded into the background.

The pandemic “has not yet left the scene,” IMF Managing Director Kristalina Georgieva said in comments last week that set the stage for this week’s meetings. But she said current priorities for global economic officials are to rein in inflation, improve fiscal policy after massive spending at the start of the pandemic, and find ways to protect developing countries against rising global interest rates.

“It’s totally surprising” that a health event that continues to weigh heavily on the global economy has dropped down the priority list so quickly, said Robin Brooks, managing director and chief economist at the Institute of International Finance. “The world can be completely different… How do we recover growth? How do we build fiscal space, since we use so much” in combating the initial shock of the pandemic?

‘Mirror World’

The group of global officials meeting this week in Washington will meet in person for the first time since the start of the pandemic, and they are entering a melting pot of perhaps half a dozen or more acute problems — in addition to fundamental challenges like climate change.

Russia, a major commodity producer, is in a real pariah position because of the invasion of Ukraine; Europe faces the prospect of recession due to risks partly related to the war; China’s economy is faltering under its still strict Covid zero policies; a winter energy crisis is possibly at hand; liquidity tensions arose in financial markets; inflation seems persistent; the US central bank’s response to rising prices has hurt financial markets.

In this context, the pandemic may seem less urgent. While cases are on the rise again in Europe and there is always the worry of another mutation, daily deaths attributed to the coronavirus averaged just over 1,400 in the week ending October 9, about a tenth of what was recorded at the height of the crisis. according to data compiled by the Johns Hopkins University Coronavirus Resource Center.

However, it remains one of the main factors influencing global economic outcomes right now, from the lasting impact of China’s strict policies to stop the spread of the virus to the chronic shock to labor markets.

Countries like Japan are still struggling with restrictions and only recently lifted limits for foreign travelers, as companies struggle to understand how markets, consumers and workers have changed their desires and what they are willing to pay – or be paid for – for them.

Economists remain in the early stages of understanding how the events of the past two years have changed the world, and — while some dismiss the risk of widespread “regime change” — certain effects of the pandemic appear increasingly permanent.

In the UK and the US, job gaps persist. Job recovery in US sectors such as education and day care, for example, remains stunted, a fact that could affect the functioning of the rest of the workforce, given the impact of these parts of the economy on households.

Studies have begun to document a potentially permanent blow from the pandemic to the labor supply. A recent analysis concluded that ongoing infections are keeping an estimated 500,000 people out of work in the United States; A recent Census survey on the “Long Covid” calculated that 8.5 million people who are employed had symptoms that lasted at least three months and reduced their ability to carry out everyday activities.

In the UK, the prolonged illness has displaced more than 377,000 people since the start of the pandemic, about 1% of the workforce.

It may just be the beginning of understanding what the pandemic has meant and how the world may need to prepare for the next shock.

Combine labor shortages with supply disruptions and other new “frictions,” said Diane Swonk, KPMG’s chief economist, and what is emerging could be a “mirror world” of what came before, with “faster economic cycles.” short periods, more frequent increases in interest rates and inflation”.

“It won’t go away,” she said.

Leika Kihara and Mark John collaborated. Translated by Luiz Roberto M. Gonçalves