We will forget about Covid-19—in 2050

Needless to say, the Covid-19 outbreak has disrupted our everyday lives, our businesses, our national economies, everything! But, to make a perhaps-not-cultured quote, somebody used to say it can't rain all the time. When will all this end? The global consulting expert McKinsey & Company has recently published an insightful analysis on this very topic.

First of all, it is essential to define what end truly means. The first distinction to make is between an epidemiological endpoint and a socio-economical endpoint. The latter means the moment when all aspects of social and economic life can resume without fear of ongoing mortality—what we can call the “beginning of a new normalcy”. According to McKinsey, the epidemiological endpoint will coincide with the time when herd immunity is achieved, that is when a sufficient percentage of the population will have become immune to the infection, thus reducing the possibility of getting sick for all other individuals. The most likely time frame for this phenomenon to happen in developed countries is Q3 or Q4 of 2021. However, this will vary depending on the specific location. Moreover, this study claims that a vaccine will likely be key to achieving herd immunity, and regular revaccinations may be needed in the future to prevent new epidemiological waves.

A sort of normalcy might be reached earlier, in the first or second quarter of 2021. It is what the authors call a transition to normalcy, because the process that will lead us to see familiar scenes again – such as hassle-free air travel, crowded stores, and full-service restaurants, gyms, or factories – will be gradual. Besides, this new normalcy might be significantly different from the one we know in countless ways.

According to OECD (Organization for Economic Co-operation and Development), the global economy will gain momentum over the coming two years, with global GDP at pre-pandemic levels by the end of 2021. However, the recovery will be uneven across countries, potentially leading to permanent changes in the world economy.

Pandemics leave scars: this is the concept of economic scarring. Unemployment tends to be persistent after economic shocks, and such downturns usually have lingering effects on investments and innovation, as well as productivity. Many experts warn, for instance, that the Covid-19 pandemic will pose a long-lasting threat to the youth unemployment rate in the European Union and the US. Global output – says OECD – is projected to remain around 5% below pre-crisis expectations in many countries in 2022.

And what about the world in 10 or 20 years? According to a recent article published by the CRU Group, the majority of the world will be unaffected by Covid-19 in 2050. This paper analyzes the pace at which different regions will recover from the pandemic-induced shock.

Nine of the ten largest economies in 2020 also appear amongst the ten largest economies in 2050, says author Tarabini. China will overtake the US as the world’s largest economy in 2031, as predicted last year. The Covid-19 will delay India’s journey to becoming the third-largest economy, but it will not hold Indonesia back. All in all, Asian economies are projected to progress the most in the next 30 years, while European economies will decline in relative size.

To summarize, the coronavirus will leave permanent scars, but it probably will not get in the way of the long-term fate of the States too much. The depth of the wounds will depend on everyone's behavior, and especially on the answers that policymakers will give in terms of health sector investments, international policy cooperation, and economic decisions in the near and not-so-near future.

Sources:
OECD (2020), OECD Economic Outlook, Volume 2020 Issue 2: Preliminary version, OECD Publishing, Paris, https://doi.org/10.1787/39a88ab1-en.

McKinsey & Company (2020), When will the COVID-19 pandemic end?, https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/when-will-the-covid-19-pandemic-end#

CRU Group (2020), The world in 2050: largely unaffected by Covid-19, https://www.crugroup.com/knowledge-and-insights/insights/2020/the-world-in-2050-largely-unaffected-by-covid-19/