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ECONOMYImpacts of Covid-19 on the world economy

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Ilham Nagiyev

The world has been fighting for three years to reduce the impact of Covid-19. The fight against pandemics, which has been a major turning point for humanity and civilization continues today as it has in the past. Although we have reduced the spread of the virus and the likelihood of death, the difficulty of the economic recovery process and future uncertainties push us to re-evaluate the situation we are in.

The weakening of the impact of the pandemic and the vaccination process at the beginning of 2022 proved to be a catalyst for global resumption of work and the economy. In the three years since the pandemic began, the global economy in 2021 alone has experienced the strongest recovery in 80 years. The World Bank’s analysis showed that global economic growth in 2021 alone was 5.6% due to large economic powers such as the United States and China.

However, despite all this recovery process, GDP growth in 2021 has declined by 3.2% compared to the pre-pandemic period and the recovery process in many areas, including the service sector, has not been as rapid as expected. According to estimates, the global service sector growth in 2021 alone has been 10% lower than the pre-pandemic period.

The global economy faced a new wave of recession before even being able to reduce the impact of the pandemic. In January 2022, the UN issued a warning about a slowdown in global economic growth. According to the World Bank’s Global Economic Prospects report, global economic growth will decline from 5.5% in 2021 to 4.1% in 2022 and to 3.2% in 2023. Although it is noted that by 2023 all developed economies will achieve a full recovery in production, these figures are predicted to be 4% lower than the pre-pandemic period. This slowdown in development indicators is expected to continue over the next few years. While, especially in 2021, serious efforts were made to overcome the impact of the pandemic, the delay is expected to have long-term effects in some areas. Job losses, reduced quality in education and investment areas, high debts are just some of those effects.

The economic growth of some countries will continue to decline in the coming years, while the growth rate in the countries with a developing economy is expected to plummet from 6.3% in 2021 to 4.6% in 2022 and to 4.4% in 2023. As the economic recovery slows, global inflation is expected to rise further and continue to rise for the rest of the year. Government assistance to weakened economies as a result of the pandemic is contributing to a more fragile economic model.

Currently, vulnerable economies are the systems most affected by the pandemic. Weak economic government assistance and delays in implementing vaccination strategies are the major obstacles for the recovery process. Per capita income growth in these countries is not expected to return to levels seen at least a decade ago, and manufacturing capacity is expected to be 8.5% below pre-pandemic levels. As a result, around 100 million people are expected to fall into poverty by the end of 2022. These negative impacts will affect the most vulnerable groups – women, children, unqualified and informal workers.

A key factor in the recovery of the global economy is the ability of states to escape from the growing debt that resulted from the pandemic and to ensure economic development. However, the existing capabilities of very few countries in the world allow both processes to be carried out simultaneously. While strong economies are expected to rely on global supply chains and financial flows, countries with relatively fragile economies will focus on the domestic market. However, any result suggests that new fluctuations will occur in the national economies in the coming years.

There is no doubt that the pandemic, which we have gradually put behind us, will arise new trends in the coming years. In an article published by the “Forbes” magazine, it’s predicted that new trends in the global economy and business will become relevant in 2022. The magazine predicts that by 2022, companies will be more focused on sustainable operations, more artificial intelligence and robot technologies will be involved in the manufacturing process, distant work activity will increase, global collaboration and integration will accelerate. At the same time, given the negative experience of the past, the use of decentralized financial resources by companies to ensure economic sustainability is likely to become more relevant. Goal-oriented entrepreneurial activity and the production of reliable products will be among the trends that will become most relevant in 2022.

The recovery of the economy and new business trends will in turn lead to some innovations in the field of vocational training. This is directly related to the radical changes of the education system in the post-pandemic period. As the pandemic period has made distant education more relevant, the hybrid methods have proven to be more effective. Auxiliary learning platforms will encourage teachers and students to focus on free and open-source technologies and will help in the cause of decentralization of education.

The business environment shows that in the near future there will be a growing demand for more mobile and versatile staff instead of traditional skilled staff. The training of such personnel will make new approaches to the education system necessary.

The post-pandemic period has shown its effects in both the economic life of Azerbaijan and in the global scale. However, with the help of the necessary restrictions imposed during the pandemic, as well as the economic support policy, Azerbaijan managed to prevent the devastating impact of the pandemic. Azerbaijan is striving to maintain its economic growth potential in the new period, and the country’s economic performance has already returned to the pre-pandemic levels. The new strategic goals of the economy are to form a more sustainable economic system in the event of a recurrence of similar situations.