Global economic impacts of COVID-19

The impacts of COVID-19 on the global economy was the focus of the latest session in Cardiff Business School’s Breakfast Briefing Series.

Dr Wojtek Paczos, Lecturer in Economics at Cardiff Business School, got things underway by delivering his concluding slide first – a way of overcoming an inability to deliver talks such as these within the time limit set.

“If you ask my students, then they’re going to tell you it’s actually impossible for me to finish in half an hour when I start talking,” he joked.

He explained that over the course of the briefing he will present four main points:

1. The structure of the economy and how the population lives matters both for the spread of COVID-19 pandemic and for the recovery.
2. The recovery will be an inverted square root shape, which means after a big drop it will recover initially very fast but soon level off.
3. The process of globalisation will neither reverse nor stop.
4. Changes in economic policy including higher levels of public debt, more regulated labour markets, higher taxes and more funded public healthcare.

His conclusions reached, Dr Paczos turned once again to the start of his presentation and contextualised the briefing within a wider body of his work on the economic impact of the COVID-19 pandemic, firstly across the Polish media and also on the LSE and Cardiff Business School blogs too.

One of the most notable publications was a four stage plan for economic recovery following COVID-19 in Poland which Dr Paczos co-authored with Dr Pawel Bukowski.

Dr Paczos explained that today’s briefing would focus on stage four of this project – the new normal – where conclusions are starting to be drawn about the impact of the pandemic and structural changes and new economic policies are being implemented.

Summarising what exactly happened to the economy during the pandemic, Dr Paczos said: “Lockdowns create recessions. This is unavoidable and, most importantly, it is purposeful...”

Implementing measures such as this creates negative effects on output and supply, explained Dr Paczos. He predicts that hibernating the economy in this way for three months, will cost around 10% of GDP.

Moving on, he showed how the COVID-19 pandemic compares with the financial crisis in 2007/8.

Dr Paczos explained that the mode of disruption differed in the financial crisis as did the speed of the onset. Different sectors were affected also and, crucially, the UK financial system was deregulated and leveraged acting as an amplifier in 2007/8.

Finally, the response to the financial crisis was one of fiscal austerity, whereas COVID-19 was met with fiscal expansion.

Interrogating those data on the COVID-19 crisis from various sources*, Dr Paczos compared impacts in the UK, Poland and Spain, including:

• the differences in GDP growth and unemployment before
• the population density and concentration in those same nations
• Government reaction
• recovery.

Before accepting questions from attendees via Chair Professor Huw Dixon, Head of the Economics Section at Cardiff Business Shool, Dr Paczos looked to what has become known as the new normal.

He outlined changes in regulation and public debt that will characterise our lives and livelihoods in the near future. And in conclusion highlighted some potential positives.

He said: “Trade is recovering faster after COVID than it did after the Financial Crisis in 2007/8. Therefore, I don’t expect globalisation to either reverse, slow down or stop.

“However, things will change.” And especially in healthcare, Dr Paczos stressed.

“Healthcare expenses are an investment in the future of the economy. And if we had invested prior to the pandemic, maybe we could have used less stringent economic measures so that a recession wouldn’t have had to happen to save lives.”

Find out more about Dr Wojtek Paczos’ research on COVID-19.

Cardiff Business School's Breakfast Briefing Series is a network of events which enables business contacts to find out more about the latest research and key developments from industrial partners.

Following lockdown measures, implemented by Welsh Government in response to the COVID-19 pandemic, the School’s Executive Education Team has moved the series online.

If you were unable to attend, watch this recording of the event.

*Dr Paczos’ sources included:

Centre for Budget and Policy Priorities, 2020
Coronavirus Government Response Tracker, University of Oxford, 2020
Eurostat, May 2020,
Federal Reserve Economic Data, St. Louis Fed, 2020
Our World in Data 2020, University of Oxford, 2020
Socioeconomic Data and Applications Centre 2020
World Economic Outlook, International Monetary Fund, October 2019, April 2019, June 2019