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Global Economic Effects of COVID-19

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Global Economic Effects of COVID-19 Global Economic Effects of COVID-19 Updated November 19, 2020 Congressional Research Service https://crsreports.congress.gov R46270 SUMMARY R46270 Global Economic Effects of COVID-19 November 19, 2020 In the months since the COVID-19 outbreak was first diagnosed, it has spread to over 200 countries and all U.S. states. The pandemic has negatively affected global economic growth James K. Jackson, beyond anything experienced in nearly a century. Estimates so far indicate the virus could reduce Coordinator global economic growth to an annualized rate of -4.5% to -6.0% in 2020, with a partial recovery Specialist in International of a rate of 2.5% to 5.2% in 2021. However, a resurgence in infectious cases in Europe, the Trade and Finance United States, and various developing economies in September and October renewed calls for lockdowns and curfews and could weaken or delay an economic recovery. The economic fallout Martin A. Weiss from the pandemic could also risk continued labor dislocations as a result of lingering high levels Specialist in International of unemployment not experienced since the Great Depression of the 1930s and high levels of Trade and Finance debt among developing economies. The human costs in terms of lives lost will permanently affect global economic growth in addition to the cost of rising levels of poverty, lives upended, careers derailed, and increased social unrest. Some estimates indicate that 100 million to 110 Andres B. Schwarzenberg million people globally could enter extreme poverty as a result of the contraction in the global Analyst in International economy. Global trade could fall by an annual amount of 9.2%, depending on the depth and Trade and Finance extent of the global economic downturn, exacting an especially heavy economic toll on trade- dependent developing and emerging economies. The full impact will not be known until the Rebecca M. Nelson effects of the pandemic peak. This report provides an overview of the global economic costs to Specialist in International date and the response by governments and international institutions to address these effects. Trade and Finance Karen M. Sutter Specialist in Asian Trade and Finance Michael D. Sutherland Analyst in International Trade and Finance Congressional Research Service Global Economic Effects of COVID-19 Contents Overview ......................................................................................................................................... 1 Economic Policy Responses ............................................................................................................ 9 Fiscal Measures ....................................................................................................................... 10 Fiscal Deficits .................................................................................................................... 11 Worker Assistance Programs ............................................................................................ 12 Monetary and Prudential Measures ......................................................................................... 14 Economic Forecasts ....................................................................................................................... 16 Global Growth ......................................................................................................................... 16 The OECD Forecast .......................................................................................................... 17 The IMF Forecast .............................................................................................................. 22 The World Bank Forecast ................................................................................................. 24 Global Trade ............................................................................................................................ 26 Global Foreign Investment ...................................................................................................... 29 Economic Policy Challenges ......................................................................................................... 31 Major Economic Developments .................................................................................................... 33 Financial Markets .................................................................................................................... 33 International Role of the Dollar .............................................................................................. 35 March 2020 ............................................................................................................................. 38 April 2020 ............................................................................................................................... 44 May 2020 ................................................................................................................................ 48 June 2020 ................................................................................................................................ 49 July 2020 ................................................................................................................................. 51 August 2020 ............................................................................................................................ 52 September 2020 ....................................................................................................................... 52 October 2020 ........................................................................................................................... 53 November 2020 ....................................................................................................................... 53 Policy Responses ........................................................................................................................... 55 The United States .................................................................................................................... 56 Monetary Policy ................................................................................................................ 61 Fiscal Policy ...................................................................................................................... 63 Personal Income and Outlays ............................................................................................ 66 Europe ..................................................................................................................................... 70 The United Kingdom ............................................................................................................... 78 Japan ........................................................................................................................................ 81 China ....................................................................................................................................... 82 Multilateral Response .................................................................................................................... 82 International Monetary Fund ................................................................................................... 82 World Bank and Regional Development Banks ............................................................................ 83 International Economic Cooperation ...................................................................................... 84 Estimated Effects on Developed and Major Economies ............................................................... 86 Asian Development Bank 2020 Forecast .......................................................................... 86 Emerging Markets ......................................................................................................................... 87 International Economic Cooperation ............................................................................................. 89 Looming Debt Crises and Debt Relief Efforts .............................................................................. 90 Congressional Research Service Global Economic Effects of COVID-19 Other Affected Sectors .................................................................................................................. 92 Conclusions ................................................................................................................................... 94 Figures Figure 1. Initial U.S. Weekly Claims for Unemployment Insurance, 2020 ..................................... 5 Figure 2. IMF Projected Government Fiscal Deficits Relative to GDP ......................................... 11 Figure 3. Unemployment Rates Among Major OECD Countries ................................................. 18 Figure 4. Major Economic Forecasts ............................................................................................. 19 Figure 5. IMF Forecast, Gross Domestic Product ......................................................................... 24 Figure 6. WTO Estimates of Quarterly Global Exports and Imports, Volumes and Values .......... 27 Figure 7. Global Foreign Direct Investment Inflows .................................................................... 30 Figure 8. U.S. Direct Investment; Inflows and Outflows .............................................................. 31 Figure 9. Dow Jones Industrial
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