We are living in an economically tumultuous season whose impact continues to shake the global economic dynamics. In the past three years, the economy has not seen a reprieve with the triple threat of shocks coming one after the other.
First, it was the coronavirus pandemic. Then came the Ukraine war. And now the death of the United Kingdom (UK)’s Queen Elizabeth II and its global economic impact at a time when the world’s economy was beginning to cope with the shocks.
This is threatening global economic recovery and growth, thus challenging governments to be more innovative and creative in cushioning and promoting their economies.
The story begins with the coronavirus (COVID-19) pandemic in December 2019. The COVID-19 pandemic and its economic impact evolved rapidly in scope and severity; thus disrupting economies and wiping away sources of income and livelihoods.
The pandemic has killed roughly 6,5 million people since 2019 when it was announced in China. However, its impact on healthcare systems and the global economy has far-reaching effects.
With COVID-19 still with us, experts continue to count the costs of the pandemic now and for years to come. The damage is incalculable.
Thus far, researchers estimate that the COVID-19 pandemic has cost the world US$114 trillion or 120% of global gross domestic product. Of course, it is impossible to provide a value for the loss of human life but the damage caused by COVID-19 is immense.
By early this year, most countries had ventured into massive economic recovery programmes on the understanding that the pandemic was abating.
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Some of the measures include quantitative easing, providing economic ancillary and stimulus packages and helping to resuscitate small-to-medium business enterprises and wean them off government expenditure.
When everyone thought the economic recovery programmes were on course and almost bearing fruit amid fears of rising global inflation and imminent economic recession, the war in Ukraine broke out.
The response by Western countries of imposing sanctions on Russia for attacking Ukraine was mistimed, misinformed, miscalculated and have disrupted the global economy by pushing the prices of global oil and wheat supplies upwards, thus aggravating an already fragile situation.
Oil and wheat were in short supply triggering massive price hikes condemning prolific and promising economies back into retraction. The war in Ukraine triggered geopolitical changes and turmoil in the financial markets and massively increased uncertainty about the recovery of the global economy, largely because of its disruption to commodity markets (especially food and energy), logistic networks, supply chains, foreign direct investment and services sectors.
The lingering effects of the COVID-19 pandemic, coupled with the economic impact of the war in Ukraine are worsening global vulnerabilities. Poor countries are the most affected by the rising cost of living as a result of these two factors largely because of rising food prices, energy prices and tight financial conditions.
The death of Queen Elizabeth II on September 8, will also cause a major dent to the global economic recovery which is currently being felt in the UK. The UK was in 10 days of mourning which meant that financial markets were closed on some days, a scenario that impacts other global markets. The Queen’s death further slowed down economies weakened by inflation, risk of recession, numerous strikes and a fall in the British pound.
The impact of the death of the Queen is not only limited to the economic slowdown caused by holidays, but it also delayed the implementation of plans to support their economy and its peripheral impact on Commonwealth countries and across the world. It also meant the UK suspended all political, social and economic activities during the mourning period, while the country braced for the huge cost of replacing the current coins and notes, passports, stamps and any other items which bore the queen’s face since 1952.
These changes will be costly and disruptive mainly amid imminent company closures, bank closures, uniform updates and others. This has escalated fears of a major recession as the UK deals with the transition from Queen to King.
Why should the world worry about the Queen’s death and the UK’s transition to King? The UK is a major trading partner with European Union countries, the United States of America, Asia and wider commonwealth community. Any form of disruption in its economy will likely have similar implications as the Ukraine situation even when there is no war in the UK. The UK is integrated into the world trade and financial systems and its linkages with the rest of the globe is higher compared with other major economies. This means that whatever happens in the UK will likely affect other parts of the world.
There is already panic that the UK economy might already be in recession after a plunge in retail sales in August which resulted in massive offloading of the British pound on international money markets, trading at a 37-year low against the US dollar. The World Bank has also warned that rising interest rates in the UK could push the global economy into a recession next year, badly affecting weaker nations that trade with the UK.
- Tapiwa Gomo is a development consultant based in Pretoria, South Africa. He writes here in his personal capacity.
