COVID-19 - Economic, Social, And Nutritional Effects Of The Crisis.

More than half of the world's population has been, is, or will be subjected to some type of social distancing regime aimed at containing the COVID-19-related health catastrophe.

Business activity has dropped dramatically as a result of a mix of policy and personal reactions aimed at lowering the danger of getting the virus, with personal action likely being more significant than policy in lowering economic activity (Goolsbee and Syverson, 2020).

The combined supply and demand shock triggered a worldwide recession far worse than that of the global financial crisis of 2008–2009, owing to production disruptions and income losses.

The International Monetary Fund (IMF, 2021a, b) estimates that the effects will last for a long period.

Despite a visible rebound in 2021, global GDP is expected to be 3.7 percent lower than pre-COVID levels by January 2022.

The poor world has been affected the worst, with GDP losses estimated at 8% in developing Asia (excluding China) and 6.9% and 6.1 percent in Latin America and Sub-Saharan Africa, respectively.

Apart from supply interruptions induced by governments' lockdown measures in these areas, developing nations are harmed most by the transmission of the European and American recessions via trade, finance, and remittance networks.

The significant reduction of working hours throughout the globe has been a fundamental indication of the recession.

According to the International Labour Organization (ILO, 2021), about half of all working-hour losses in 2020 were attributable to job losses, while the other half was due to decreased working hours (including employees who are employed but are not working).

It also discovered that there was significant regional variation: employment losses were highest in the Americas, both as a percentage of the working-age population and in relation to working-hour losses, and lowest in Europe and Central Asia, where reduced working hours have been widely supported by job retention schemes.

Despite the adjustment via shorter working hours, the ILO anticipates that job losses in 2020 would be enormous, with 114 million jobs lost compared to pre-crisis employment levels in 2019.

However, compared to a "no-pandemic" scenario, this estimate may understate the true magnitude of work losses: a model-based scenario study estimates that worldwide employment drop might have impacted as many as 144 million jobs (ILO, 2021).

In contrast to the Great Recession of 2008–2009, the COVID-19-related job losses mostly resulted in increased inactivity rather than increased unemployment rates: of the 81 million job losses, 81 million individuals moved into economic inactivity, while 33 million were jobless.

As a consequence, in 2020, the worldwide labor participation rate fell by 2.2 percentage points (compared with a just 0.2 percent points decline between 2008 and 2009).

Only high-income nations saw a bigger rise in unemployment than inactivity (driven largely by labour market adjustment in the United States).

Workers' earnings were significantly reduced as a result of the enormous cutbacks in working hours.

According to the ILO, labor income will fall by 8.3 percent in 2020 compared to 2019.

Lower-middle income nations suffered the biggest loss in labor income, amounting to 12.3 percent.

While average labor income losses were comparable in low-, middle-, and high-income nations, these averages mask significant differences between and within these country groups.

When broken down by geographic location, employees in the Americas lost an estimated 10.3 percent of their labor income, while workers in Asia and the Pacific lost 6.6 percent.

Overall, worldwide labor income fell by around US$3.7 trillion in nominal terms (using 2019 market exchange rates) in 2020, equating to 4.4 percent of global GDP in 2019. (ILO, 2021).

The pandemic's impact on labor income reveals significant disparities amongst categories of employees (Murshed, 2021).

In general, lower- and middle-skilled employees were hit more by job and income losses than higher-skilled individuals.

This is due in part to the fact that teleworking was more commonly a possibility for such people, while social distancing measures made it difficult to do many lower-skilled occupations.

Labor income losses plunged many people into poverty (causing them to limit spending on essentials after savings were depleted) and prolonged the recession due to demand fallout when the ability to improve social safety nets is insufficient.

The following part delves more into the effects of poverty and consumption.

Effects of Poverty and Food Consumption. 


COVID-19's poverty effect must be assessed carefully.

This is true not just because the crisis is still developing and knowledge about its specific socioeconomic repercussions is limited, but also because the routes of influence are many and internationally interwoven.

Several widely cited analyses have used simplistic approaches to calculating the projected impact of the global recession on average per capita incomes to estimate poverty impacts, based on household survey data available through the World Bank's PovcalNet website (see, for example, Mahler et al., 2020 and World Bank, 2020a, 2020b; and Sumner et al., 2020).

This method has a key flaw in that it implies that the crisis had no effect on within-country income distribution and, as a result, that employees from all sectors and types of activity were equally impacted.

According to Laborde et al. (2021), this assumption fails to account for the complexity of the effect pathways and may significantly underestimate the pandemic's effects.

They replicate the implications of the COVID-19 pandemic on poverty and food security using a global general equilibrium model coupled to country-specific family models, taking into account all main transmission routes, including the labor market impacts.

Apart from the disease's direct effects on workers' ability to work, income losses result from people's desire to avoid contracting the disease and their altruistic concerns about infecting others, as well as policy responses aimed at reducing the negative externalities associated with an uncontrolled pandemic.

Many of the resulting changes in behavior and economic functioning are still unknown, and it's difficult to draw on prior experience since no events on the size of the COVID-19 pandemic have ever happened in today's globalized society.

As a result, Laborde et al. (2021) had to make a number of assumptions regarding economic actors' reactions to this unique circumstance.

Domestic supply disruptions, global market disruptions, household behavioral reactions, and policy responses are the four drivers of COVID-19 consequences, according to the researchers.

Laborde et al. (2021) project a 7% decline in global GDP in 2020 (compared to a scenario without COVID-19), and they show that developing countries are being disproportionately harmed by declines in trade and remittance incomes, as well as business disruptions caused by social distancing measures, in a scenario with assumptions based on evidence available by September 2020.

Without significant social and economic mitigation measures, such as a fiscal stimulus and expansion of social safety nets in the global South (scenario assumption), the impact on extreme poverty (as measured by the PPP$1.90 per person per day international poverty line) is devastating.

In the absence of COVID-19, the number of poor rises by 20% (almost 150 million people), disproportionately impacting urban and rural populations in South Asia, where 72.5 million additional individuals will enter the ranks of the poor (equivalent to a 27 percent increase in that region).

The rise in poverty in rural regions is predicted to be lower than in urban areas, partly due to the disease's lower rate of transmission and partly due to the robustness of food demand and supply compared to many other, more susceptible sectors.

In Sub-Saharan Africa, the number of impoverished people is expected to rise by 15%, or 50.5 million people.

When the poverty effect is decomposed, the predicted rise in the number of poor by 150 million is much larger (i.e., around 50 million more) than when the World Bank and UNU-WIDER studies assume a uniform decline in average per capita incomes in each nation.

It implies that COVID-19 must have exacerbated intra-country economic disparities significantly.

The recession's income and price shifts, as well as supply disruptions induced by the pandemic, are likely to have resulted in significant changes in food consumption habits, with negative nutritional effects.

According to Laborde et al. (2021), this will lead to a shift in demand away from nutrient-dense foods like fruits and vegetables, dairy products, and meats and toward calorie-dense basic staple foods like rice, maize, and other basic grains, raising concerns about dietary quality and a likely increase in micronutrient deficiency.

In both established and developing areas, the dietary change is (on average) comparable.

~ Jai Krishna Ponnappan.

You may also want to read more analysis about the COVID-19 Pandemic here.

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