By Canan Sevgili, Paolo Laudani, Alessandro Parodi and Alberto Chiumento
(Reuters) – Five years after the World Health Organization first described the COVID-19 coronavirus outbreak as a pandemic, its effects are still being felt on the global economy.
COVID-19 and efforts to contain it triggered record government debt, hit labour markets and shifted consumer behaviour. Inequality has increased, while remote work, digital payments and changes in travel patterns have endured.
Though the immediate shock has passed, COVID-19’s legacy continues to reshape global economies and markets.
Here are some of the main impacts.
Debt, inflation and interest rates
After countries borrowed money to protect welfare and livelihoods, global government debt has risen by 12 percentage points since 2020, with steeper increases seen in emerging markets.
The pandemic sparked high levels of inflation, which proved to be a major concern in the 2024 U.S. elections. Fuelled by post-lockdown spending, government stimulus packages and shortages of labour and raw materials, inflation peaked in many countries in 2022.
To offset rising prices, central banks raised interest rates, though the intensity of their interventions varied widely.
Sovereign credit ratings, which reflect a country’s ability to pay back its debts, were driven lower as economies were shuttered and governments took on huge amounts of extra debt to fill the holes left in public finances.
Data from Fitch Ratings shows the average global sovereign credit score remains a quarter of a notch lower than it was when the pandemic started, reflecting financial challenges made worse by the pandemic, inflation and stricter financial conditions.
For less wealthy emerging market countries, the average remains roughly half a notch lower.
Lower credit ratings generally translate into higher borrowing costs on international capital markets.
Labor and travel shifts
The pandemic caused millions of job losses, with poorer households and women hit hardest, according to the World Bank.
As lockdowns eased, employment regained momentum but with a considerable shift towards sectors such as hospitality and logistics due to the growing retail delivery sector.
Women’s participation in the workforce fell in 2020, mostly due to female over-representation in hard-hit sectors like accommodation, food services and manufacturing, and the burden of caring for children staying home from school. However, the gender employment gap has slightly decreased since, data shows.
Travel and leisure habits also changed. While people travel and eat out as much as they did in 2019, an increase of work-from-home has reduced commuting in major cities such as London.
