November 27, 2022

The Covid-19 pandemic has had a wide impact on the global health or economic crisis during 2020 and then until this year. Governments of countries around the world carry out various mitigation and cooperation measures to suppress the spread of Covid-19 while accelerating economic recovery. This year, global economic performance is expected to develop positively along with the economic stimulus program and accelerated vaccination.

Several international institutions predict that global economic developments in 2020 are predicted to fall deeper than in previous years. In January 2021, the IMF estimated global economic development at minus 3.5 percent. Meanwhile, the World Bank in January 2021 and the OECD in December 2020 each predict a further decline in global economic development to minus 5.2 percent and minus 4.2 percent.

The sluggish global economy cannot be separated from the impact of the Covid-19 pandemic which has spread to world economic and financial matters. His arrival came under great pressure from both supply and demand sides.

The world’s creation chain is not only stalled, let alone interrupted because many countries have chosen regional quarantine (lockdown) to contain the spread of Covid-19. Supply/creation constraints have also spread to the demand side, consumption has fallen significantly, investment has fallen drastically, and world trade (exports) as well as imports was very sluggish.

In terms of trade in goods, the World Trade Organization (WTO) estimates that global trade will shrink by minus 5.3 percent.

The decline in economic activity as well as the limited mobility of goods and services, and restrictions on the movement of the population, in the end also hit the income of industry and residents. As a result, layoffs and layoffs of employees are ubiquitous in the world.

The implementation of the mobility restriction policy to suppress the spread of Covid-19 also created shocks in both the financial market and the real zone. This is reflected in at least 5 things, namely;

First, the level of volatility reflected in the VIX Index rose to the highest level in history. The VIX Index describes the level of investor anxiety.

Second, the movement of capital flows to safe-haven assets, capital outflows from the country grew to near 100 billion US dollars. Safe havens are investments that are expected to be maintained or increase in value when the market is volatile. A haven is a haven for investors to look for to prevent the risk of loss if there is a market contraction.

Third, is the sharp decline in commodity prices.

Fourth, the Manufacturing and Services PMI contracted at its lowest point. Since the global financial crisis (Global Financial Crisis / GFC) 2008-2009.

Fifth, unemployment skyrocketed in various parts of the world, reaching double digits. In the US, during 2020 it erased the 22.4 million employment it had created since the Great Depression of 1929. In Italy, unemployment stood at 12.7 percent, and in France was near 10.4 percent.

By Zakyhumam