Global Economic Effects of COVID-19

March 13, 2020 – November 10, 2021 R46270

Global Economic Effects of COVID-19
November 10, 2021
The COVID-19 viral pandemic is an unprecedented global phenomenon that is also a highly
personal experience with wide-ranging effects. On September 20, 2021, U.S. viral deaths
James K. Jackson,
surpassed the 675,446 total from the 1918 Spanish flu, the previously worst U.S. pandemic-
Coordinator
related death total on record. The pandemic has disrupted lives across all countries and
Specialist in International
communities and negatively affected global economic growth in 2020 beyond anything
Trade and Finance
experienced in nearly a century. Estimates indicate the virus reduced global economic growth in

2020 to an annualized rate of around -3.2%, with a recovery of 5.9% projected for 2021. Global
Martin A. Weiss
trade is estimated to have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021.
Specialist in International
According to a consensus of forecasts, the economic downturn in 2020 was not as negative as
Trade and Finance
initially estimated, due in part to the fiscal and monetary policies governments adopted in 2020.

In most countries, economic growth fell sharply in the second quarter of 2020, rebounded quickly
in the third quarter, and has been mostly positive since. Although lessening, the total global
Andres B. Schwarzenberg
economic effects continue to mount. In particular, the prolonged nature of the health crisis is
Analyst in International
affecting the global economy beyond traditional measures with potentially long-lasting and far-
Trade and Finance
reaching repercussions. Economic forecasts reflect continuing risks to a sustained global

recovery posed by a resurgence of infectious cases and potential inflationary pressures associated
Rebecca M. Nelson
with pent-up consumer demand fueled by an increase in personal savings. On the supply side,
Specialist in International
shortages reflect lingering disruptions to labor markets, production and supply chain bottlenecks,
Trade and Finance
disruptions in global energy markets, and shipping and transportation constraints that are adding

to inflationary pressures.
Karen M. Sutter
Specialist in Asian Trade
As some developed economies start recovering, central banks and national governments are
and Finance
weighing the impact and timing of tapering off monetary and fiscal support as a result of

concerns over potential inflationary pressures against the prospect of slowing the pace of the
recovery. These concerns are compounded by the emergence of new disease variants and rolling
Michael D. Sutherland
pandemic hotspots that challenge national efforts to contain infections and fully restore economic
Analyst in International
activities. Major advanced economies, comprising 60% of global economic activity, are projected
Trade and Finance
to operate below their potential output level through at least 2024, which indicates lower national

and individual economic welfare relative to pre-pandemic levels. Compared with the
synchronized nature of the global economic slowdown in the first half of 2020, the global

economy has shown signs of a two-track recovery that began in the third quarter of 2020 and has
been marked by a nascent recovery in developed economies where rates of vaccinations are high, but a slower pace of growth
in developing economies where vaccination rates are low.
As a whole, developed economies have made strides in vaccinating growing shares of their populations, raising prospects of a
sustained economic recovery in late 2021 and into 2022 and, in turn, a recovery in the broader global economy. However,
new variants of the COVID-19 virus and a surge in diagnosed cases in large developing economies and resistance to
vaccinations among some populations in developed economies raise questions about the speed and strength of an economic
recovery over the near term. A resurgence of infectious cases in Europe, Latin America, Russia, the United States, Japan,
Brazil, India, and across much of Africa renewed calls for lockdowns and curfews and threatened to weaken or delay a
potential sustained economic recovery into late 2021. The economic fallout from the pandemic has had a disparate impact on
certain sectors of the economy, particularly the service sector, and certain population groups and could risk continued labor
dislocations. In some cases, workers are reconsidering their career choices and work patterns, which may imply post-
pandemic economies marked by more varied labor arrangements and altered urban environments.
The human costs in terms of lives lost will permanently affect global economic growth in addition to the cost of elevated
levels of poverty, lives upended, careers derailed, and increased social unrest. Some estimates indicate that 65 million to 75
million people may have entered into extreme poverty in 2020 with 80 million more undernourished compared to pre-
pandemic levels. In addition, some estimates indicate that the decline in global trade in 2020 exacted an especially heavy
economic toll on trade-dependent developing and emerging economies. This report provides an overview of the global
economic costs to date and the response by governments and international institutions to address these effects.
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Global Economic Effects of COVID-19

Overview
The World Health Organization (WHO) first declared COVID-19 a global health emergency in
January 2020; on March 11 it announced the viral outbreak was officially a pandemic, the highest
level of health emergency.1 Since then, the emergency evolved into a global public health and
economic crisis that affected the $90 trillion global economy beyond anything experienced in
nearly a century. In a variance of John Donne’s poem, “No Man is an Island,” the viral infection
spread between and across countries and affected nearly every community, demonstrating the
highly interconnected nature of the global economy: the virus has been detected in every country
and all U.S. states.2 The focal point of infections shifted from China to Europe, especially Italy,
by early March 2020, but by April, the focus had shifted to the United States, where the number
of infections had been accelerating. By April 2021, India, Brazil, parts of Africa and Asia
emerged as viral hot spots with the number of infections and deaths reaching daily record levels.
By mid-September 2021, the more virulent COVID-19 Delta variant reportedly had become the
more globally dominant strain of the virus and prompted various national leaders to call for
additional health measures, including reintroducing travel restrictions.3 Projections by the
European Center for Prevention and Disease Control (ECDC) indicated the variant could account
for 90% of coronavirus infections across much of Europe by the end of August 2021 and “could
lead to a fast and significant increase in daily cases in all age groups.”4 The Delta variant was also
growing as a share of total cases in the United States, accounting for 97.9% of all cases in late
August 2021, according to the Center for Disease Control (CDC).5 After escaping the initial
rounds of infections, cases were growing rapidly in Australia and New Zealand, which instituted
restrictions on social gatherings and movement.6 COVID-19 infections were rising in Russia in
June 2021, reportedly due to the unwillingness of the populace to receive the Russian-developed
Sputnik V vaccine.
According to the World Health Organization, by November 1, 2021, the COVID-19 virus had
sickened over 246.6 million people globally with over 5.0 million fatalities:7 the United States
reported that over 45.6 million Americans had been diagnosed and over 740 thousand people had
died from the virus. At one point, more than 80 countries had closed their borders to arrivals from
countries with infections, ordered businesses to close, instructed their populations to self-
quarantine, and closed schools to an estimated 1.5 billion children.8 On August 23, 2021, the

1 Bill Chappell, “COVID-19: COVID-19 Is Now Officially a Pandemic, WHO Says,” National Public Radio, March
11, 2020. https://www.npr.org/sections/goatsandsoda/2020/03/11/814474930/COVID-19-COVID-19-is-now-officially-
a-pandemic-who-says.
2 “Mapping the Spread of the COVID-19 in the U.S. and Worldwide,” Washington Post Staff, Washington Post, March
4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.
3 Ang, Katerina, Delta is By Far World’s Most Dominant Coronavirus Variant, WHO Says, The Washington Post,
September 22, 2021; Gross, Anna, Leila Abboud, and John Burn-Murdoch, Delta Variant Begins to Spread,
Threatening EU’s Covid Progress, Financial Times, June 21, 2021. https://www.ft.com/content/d4abbe5e-8650-4a76-
9fea-2d3efa2ed52b.
4 Miller, Michael E., Covid-19 Updates: Merkel Warns Europe is ‘On Thin Ice’ as Concerns About Delta Variant
Grow, The Washington Post, June 25, 2021.
5 Center for Disease Control. https://covid.cdc.gov/covid-data-tracker/#variant-proportions.
6 Pannett, Rachael, Sydney Enters ‘Scariest’ Phase of Pandemic as Delta Variant Spreads, Leader Says, The
Washington Post, June 24, 2021.
7 World Health Organization. https://covid19.who.int/.
8 “The Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,” The
Economist, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-
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Food and Drug Administration (FDA) gave full approval to the Pfizer-BioNTech coronavirus
vaccine, leading various institutions and the U.S. military to begin mandating vaccinations for
employees and members.9
As infectious cases began rising sharply in late February 2020, governments took unprecedented
steps in March 2020 to lock down social activities to contain the spread of the pandemic,
inadvertently creating a global economic recession. Government responses in March 2020 were
extraordinary in terms of the speed with which they took place, the broad scope of the fiscal and
monetary policies they adopted, and the number of countries that were involved, often without a
formal, coordinated plan. Initially, governments adopted monetary policies aimed at stabilizing
financial markets and ensuring the flow of credit. In the second phase, governments focused
policy actions on fiscal measures aimed at sustaining economic growth as they adopted
quarantines and social distancing measures. In the third phase, governments shifted policies to
developing, purchasing and distributing vaccines. As the health and economic effects have
evolved and persisted, the phases of government actions have become less distinct: efforts to
vaccinate populations have coincided with additional fiscal measures to sustain household
income, for instance.
The Bureau of Economic Analysis (BEA) reported that policy actions to lock down the economy
pushed the U.S. GDP growth rate down to 9.0% in the second quarter of 2020 compared with the
previous quarter, or at an annualized rate of -31%, the largest quarterly decline in U.S. GDP
recorded over the past 70 years.10 Subsequently, U.S. GDP grew by 7.5% in the third quarter, or at
an annualized rate of 30%, based primarily on gains in personal consumption, reflecting an
increase in income and support through government transfer payments.11 Fourth quarter 2020 data
indicate the U.S. economy grew by slightly more than 1.0% over the third quarter, or at an
annualized rate of 4.5%. On a year-over-year basis, U.S. real GDP is estimated to have declined
by 3.4% in 2020 compared with 2019.12 In the third quarter of 2021, the annual rate of growth of
U.S. GDP rose by 2.0%, after rising by 6.3% and 6.7% in the first and second quarters,
respectively.
In its September 8, 2021, Beige Book analysis, the Federal Reserve (Fed) reported that economic
activity had slowed slightly in the July through August period compared with moderate to robust
growth in all 12 Federal Reserve Districts during the May to early July period. The Fed attributed
the slowdown in activity to lower levels of consumer dining and recreation activities arising from
concerns over the spread of infections by the Delta variant of the COVID-19 virus. Other sectors
of the economy experienced slower growth as a result of labor and supply-side shortages. Low
inventory levels in the auto sector and reduced supplies of residential housing also constrained
sales activity in these sectors; the Fed also reported mild gains in residential and nonresidential
construction and in the energy and agricultural sectors.13 In its Monetary Policy report on
September 22, the Fed indicated the economy had recovered to the point where it could begin a

get-ahead-of-the-COVID-19.
9 Guarino, Ben, Laurie McGinley and Tyler Pager, Pfizer-BioNTech Coronavirus Vaccine Gets Full FDA Approval,
Potentially Persuading the Hesitant to Get a Shot, The Washington Post, August 23, 2021.
10 Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update, Bureau of Economic Analysis,
July 30, 2020. https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-
annual-update.
11 Gross Domestic Product, Third Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, October 29, 2020.
12 Gross Domestic Product, Third Quarter 2021 (Advance Estimate), Bureau of Economic Analysis, October 28, 2021.
13 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, the Federal
Reserve System, September 8, 2021. https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm.
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gradual tapering off its monthly asset purchases in November, characterized as a “moderation in
the pace of asset purchases,” and make adjustments to interest rates in 2022.14
The Fed’s Beige Book analytical period occurred prior to a strong Gulf-centered hurricane in late
August that compounded existing shipping and transportation issues through Gulf ports that were
struggling with pandemic-related issues that had handicapped oil production, refining and
transportation, and shipments of agricultural products. In addition, damage to housing stock,
urban infrastructure, and increased need for medical assistance in Gulf Coast areas increased
strains on communities already struggling with the impact of the pandemic that further
compounded efforts by workers to return to their jobs.15
Through the various stages of the pandemic-related health and economic crises, governments
responded with a number of policy initiatives that often attempted to balance competing policy
objectives. As the health crisis subsides and economic activity resumes, policymakers may
consider evaluating the various policy approaches for lessons learned and for best practices to
employ in addressing similar crises, should they arise. Such an evaluation could include
 Assessing the short and long-term costs and benefits of fiscal policies that were
adopted during the crisis to address employment dislocations and support social
safety nets, compared with the potential long-term impact of deficit spending on
the rate of inflation and the long-term financial stability of the economy.
 Evaluating the costs and benefits of economy-wide business and social
lockdowns compared with the impact and effectiveness of targeted closures or
other types of restrictions.
 Reviewing the effectiveness of monetary and fiscal policies that were adopted to
support credit markets and sustain economic activity broadly during the initial
stages of the crisis, compared with policies targeted to assist specific sectors and
businesses as they experienced financial distress.
 Assessing the effectiveness of transfer payments that were directed at supporting
the most heavily affected households, the impact of such payments on household
saving rates, consumption, and decisions to return to full-time employment, the
necessary conditions and timing for tapering off the support, and the impact on
the long-term rate of growth between public versus private debt.
 Assessing the impact that central banks and monetary authorities had on financial
markets and market liquidity by intervening in sovereign debt and corporate bond
markets during the early stages of the health and economic crisis and the impact,
if any, on the ability of the markets to perform their traditional functions of
pricing risk and allocating capital.
 Assessing the optimal combination and impact of fiscal policies during a national
or global economic crisis between assisting households, firms, or state and local
governments.
 Evaluating the effectiveness of unemployment insurance systems that provide
short-term unemployment insurance to sustain workers incomes, compared with

14 Press Release, Board of Governors of the Federal Reserve System, September 22, 2021; Smith, Colby and Kate
Duguid, The Fed Prepares to Tighten: Five Takeaways From its Latest Meeting, Financial Times, September 22, 2021.
https://www.ft.com/content/1cc28b4c-63ea-44c5-a0af-af681ee6a4a4.
15 Plume, Karl, U.S. Gulf Coast Grain Exports Slowly Resume After Ida as More Power Restored, Reuters, September
9, 2021; Mohindru, Sameer C., and Pradeep Rajan, Hurricane Ida Roils Global Shipping Market: Sources, S&P Global,
September 17, 2021.
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European-style job retention programs that maintain pre-crisis employment, even
as those jobs could disappear once the support ends.16
Background
According to the October 2021 World Economic Outlook prepared by the International Monetary
Fund (IMF), global economic growth fell to an annualized rate of around -3.2% in 2020, with a
recovery of 5.9% projected for 2021 and 4.9% for 2022.17 The IMF also concluded that advanced
economies would face continued economic challenges into 2022 as a result of supply shortages
and that prospects for low-income developing economies “had darkened considerably” due to the
disparities in access to vaccines and differences in economic policy support. The pandemic-
related recession is characterized as being more global in nature than that experienced during the
2009-2010 global financial crisis as a result of its effects on developing economies. In its recent
forecast, the IMF projected geographic regions of the global economy would recover at different
speeds, reflecting differences in the pace of vaccinations, the extent of policy support, and various
structural conditions, such as the role of tourism in the economy.
Through late October 2021, various key economic and financial indicators had rebounded from
the depths of the pandemic-related economic recession, although not all parts of the global
economy had recovered to pre-COVID-19 pandemic levels.18 In addition, a resurgence in viral
cases and the emergence of new and more virulent strains of the COVID-19 virus caused some
institutions in late 2021 to lower their economic growth projections for 2021.19 Although
vaccination rates increased in various developed economies, particularly the United States,
developing economies struggled to get access to vaccines and their populations vaccinated, and
consequently, to get their economies operating at or above pre-pandemic levels. Financial market
indices largely recovered from the losses experienced in March and April 2020, international oil
prices surpassed the pre-pandemic levels, pressure appreciating the dollar had generally eased,
and labor markets appeared to be stabilizing.
By fall 2021, prior to the end of U.S. pandemic-related unemployment assistance, U.S. and
European consumers appeared to have adjusted to pandemic restrictions by relying on
unemployment benefits, personal savings, and credit to sustain their consumption activities.
Personal consumption expenditures generally increased and fell with the state of the spread of the
virus and partial business closures. Increased household and business spending, however,
increased demand for a broad range of products, including housing, food, energy, and new and
used cars and trucks, that were constrained by supply shortages and raised U.S. consumer and
producer prices in September, which rose at a monthly rate of 0.4% and 0.5%, or at annual rates
of over 4.8% and 6.0%, respectively.20
Over the long run, damage to labor markets could be problematic with a large share of the labor
force unable to or, in some sectors, unwilling to return to pre-pandemic jobs. In some cases,
workers who were unemployed during the crisis reportedly reconsidered returning to their

16 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and
Development, August 3, 2020.
17 World Economic Outlook Update, International Monetary Fund, October, 2021, p. 6.
18 Mapping the Spread of the COVID-19.
19 Platt, Eric and Colby Smith, Economists Trim Forecasts and Investors Feel Jitters Over Delta Variant, Financial
Times, August 19, 2021. https://www.ft.com/content/c21958ff-80d2-4b3b-863c-c492b361b2a4.
20 Consumer Price Index September 2021, Bureau of Labor Statistics, October 13, 2021; Producer Price Index
September 2021. Bureau of Labor Statistics, October 14, 2021.
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previous jobs and were exploring other options, which potentially could affect the pace of the
economic recovery.21 Reportedly, employment in the U.S. child-care sector in August 2021was
down more than 137,000 workers compared with March 2020 levels and played a role in keeping
1.6 million women who are mothers of children under the age of 17 from returning to the labor
force.22 Similarly, economies could face long-term costs as a result of children who were held out
of in-person education for over a year that could result in lower academic performance and
graduation rates and delayed entry into the labor market. On March 31, 2021, Kristalina
Georgieva, Managing Director of the International Monetary Fund (IMF), also warned that an
emerging market debt crisis could unfold as the global economy begins recovering and interest
rates rise, which could cause a capital outflow from developing economies.23
Economic Policy Challenges
Over the course of the pandemic and economic crises, policymakers have had to adjust to the
changing nature of the crises, while implementing targeted policies that address what had been
expected to be short-term problems without creating distortions in economies that can outlast the
impact of the virus itself. Initially, policymakers were overwhelmed by the quickly changing
nature of the global health crisis and the immediate economic effects. The extended health crisis,
however, created wide-ranging spill-over effects beyond those typically associated with monetary
and fiscal policies in ways that have hampered national economic recoveries and reinforced a
more wide-spread global trade and economic crisis. During the initial stages of the pandemic,
policymakers weighed the impact of policies that addressed the immediate economic effects at
the expense of longer-term considerations such as debt accumulation. Initially, many
policymakers felt constrained in their ability to respond to the crisis as a result of limited
flexibility for monetary and fiscal support within conventional standards, given the broad-based
synchronized slowdown in global economic growth, especially in manufacturing and trade, which
had developed prior to the viral outbreak.
Initially, the economic effects of the pandemic had been expected to arise from short-term supply
issues as factory output fell, because workers were quarantined to reduce the spread of the virus
through social interaction. The drop in China’s GDP growth rate of 8.7% in the first quarter of
2020, as indicated in Table 1, had broad international repercussions that became evident in the
second quarter of 2020 as firms experienced delays in supplies of intermediate and finished goods
through supply chains. Concerns grew, however, that virus-related supply shocks had created
more prolonged and wide-ranging demand shocks as reduced activity by consumers and
businesses led to a lower rate of economic growth in most countries and most areas. Nearly every
country experienced a decline in economic activity in the second quarter of 2020, with the notable
exception of China, which experienced a rebound in its rate of growth by 10% over the previous
quarter and was one of a few number of countries to post an overall positive rate of growth in
2020. In contrast to China’s positive rate of growth in the second quarter of 2020, a broad range
of countries experienced historic declines in growth, with India’s GDP falling by nearly 25%.
Similarly, most countries experienced a rebound in economic growth in the third quarter of 2020,

21 Dodd, Darren, Businesses Suffer Labor Pains as Economies Reopen, Financial Times, June 21, 2021.
https://www.ft.com/content/e47575aa-b6ec-4635-a0be-f4e623dacbdb.
22 The Employment Situation August 2021, Bureau of Labor Statistics, September 3, 2021; Long, Heather, The Pay is
Absolute Crap: Child-care Workers Are Quitting Rapidly: A Red Flag for the Economy, The Washington Post,
September 20, 2021.
23 Giles, Chris, Prepare for Emerging Markets Debt Crisis, Warns IMF Head, Financial Times, March 31, 2021.
https://www.ft.com/content/487c30f4-7f21-4787-b519-dde52264d141.
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although at rates that generally were lower than the rate of decline in the second quarter,
reflecting challenges posed by the on-going health crisis.
As demand shocks unfolded, businesses experienced reduced activity and profits and potentially
escalating and binding credit and liquidity constraints. While manufacturing firms experienced
supply chain shocks, reduced consumer activity through social distancing affected the services
sector of the economy, which accounts for two-thirds of annual U.S. economic output. In this
environment, manufacturing and services firms initially tended to hoard cash, which affected
market liquidity. In response, the Federal Reserve, along with other central banks, lowered
interest rates where possible and expanded lending facilities to provide liquidity to financial
markets and to firms potentially facing insolvency.
Table 1. Change in Gross Domestic Product by Major Country
Percentage change from previous period

2020
2021
Country
2019
2020
Q1
Q2
Q3
Q4
Q1
Q2
Argentina
-2.1%
-9.9%
-4.1%
-15.8%
13.2%
4.4%
2.6%
..
Australia
-0.3
-2.5
-0.3
-7.0
3.6
3.2
1.9
0.7
Austria
1.4
-6.3
-2.6
-10.6
11.6
-3.1
-1.1
4.3
Belgium
1.8
-6.3
-3.3
-11.9
11.8
-0.1
1.1
1.7
Brazil
..
..
-2.3
-9.0
7.7
3.1
1.2
-0.1
Canada
1.9
-5.3
-2.0
-11.3
9.1
2.2
1.4
-0.3
Chile
0.9
-5.8
1.9
-12.7
5.4
6.5
3.4
1.0
China
6.1
2.3
-8.7
10.0
2.8
3.0
0.4
1.3
Colombia
3.3
-6.8
-2.6
-14.8
9.7
6.2
2.9
-2.4
Costa Rica
2.2
-4.5
-1.2
-7.8
2.2
2.6
1.4
..
Czech R.
3.0
-5.8
-3.4
-8.9
6.8
0.7
-0.4
1.0
Denmark
2.1
-2.1
-0.7
-6.4
6.1
0.9
-0.9
2.3
Finland
1.3
-2.8
-0.5
-6.1
4.6
0.5
0.1
2.1
France
1.8
-7.9
-5.7
-13.5
18.6
-1.1
0.0
1.1
Germany
1.1
-4.6
-1.8
-10.0
9.0
0.7
-2.0
1.6
Greece
1.9
-8.2
-0.4
-13.0
3.9
3.5
4.5
3.4
Hungary
4.6
-5.0
-0.3
-14.4
10.6
1.6
2.0
2.7
India
..
..
0.6
-24.5
21.2
8.6
2.3
-10.2
Indonesia
5.0
-2.1
-0.9
-6.4
3.1
2.3
0.3
1.3
Ireland
4.9
5.9
2.6
-2.9
9.8
-4.6
8.7
6.3
Israel
3.8
-2.2
-1.2
-9.2
8.9
2.4
-0.4
3.9
Italy
0.3
-8.9
-5.6
-13.1
16.0
-1.8
0.2
2.7
Japan
0.3
-4.8
-0.6
-7.9
5.4
2.8
-1.1
0.5
Korea
2.0
-1.0
-1.3
-3.2
2.2
1.1
1.7
0.8
Luxembourg
2.3
-1.3
-1.6
-7.1
9.2
1.9
1.4
..
Mexico
-0.1
-8.2
-0.9
-17.3
12.7
3.3
1.1
1.5
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2020
2021
Country
2019
2020
Q1
Q2
Q3
Q4
Q1
Q2
Netherlands
2.0
-3.8
-1.6
-8.4
7.5
0.0
-0.8
3.1
New Zealand
2.0
-1.1
-1.4
-9.9
13.9
-1.0
1.4
2.8
Norway
0.9
-0.8
-1.5
-4.6
4.3
0.8
-0.6
1.1
Poland
4.7
-2.7
-0.1
-9.2
7.7
-0.3
1.3
2.1
Portugal
2.5
-7.6
-4.0
-14.0
13.4
0.2
-3.2
4.9
Russia
2.0
..
-0.7
-2.6
0.7
-0.2
-0.0
..
Saudi Arabia
0.3
-4.1
-1.6
-5.5
2.1
1.8
-0.5
0.6
South Africa
0.2
-7.0
-0.4
-16.6
13.7
1.4
1.1
..
Spain
2.0
-10.8
-5.4
-17.8
17.1
0.0
-0.4
2.8
Sweden
2.0
-2.8
-0.8
-8.1
7.5
0.2
0.8
0.9
Switzerland
1.2
-2.4
-1.6
-6.2
6.4
-0.1
-0.4
1.8
Turkey
0.9
1.8
0.4
-10.8
16.4
1.2
2.2
0.9
United Kingdom
1.4
-9.8
-2.8
-19.5
16.9
1.3
-1.6
4.8
United States
2.3
-3.4
-1.3
-8.9
7.5
1.1
1.5
1.6
EU – 27
1.8
-5.9
-3.1
-11.3
11.8
-0.2
-0.1
2.1
OECD – Total
1.7
-4.7
-1.8
-10.4
9.4
1.1
0.6
1.7
Source: Organization for Economic Cooperation and Development, Quarterly National Accounts Dataset,
September 17, 2021.
As the economic effects persisted through the spring and summer of 2020, the economic impact
spread through trade and financial linkages to an ever-broadening group of countries, firms and
households. These growing economic effects potentially increased liquidity constraints and credit
market tightening in global financial markets as firms hoarded cash, with negative fallout effects
on economic growth. At the same time, financial markets factored in what they anticipated would
be an increase in government bond issuance in the United States, Europe, and elsewhere as
government debt levels rose to meet spending obligations during an expected economic recession
and increased fiscal spending to fight the effects of COVID-19. Unlike the 2008-2009 financial
crisis, reduced demand by consumers, labor market issues, and a reduced level of activity among
businesses, rather than risky trading by global banks, led to corporate credit issues and potential
insolvency.
Liquidity and credit market issues presented policymakers with a different set of challenges than
addressing supply-side constraints. As a result, the focus of government policy expanded from a
health crisis to macroeconomic and financial market issues that were addressed through a
combination of monetary, fiscal, and other policies, including border closures, quarantines, and
restrictions on social interactions. Essentially, while businesses attempted to address worker and
output issues at the firm level, national leaders attempted to implement fiscal policies to prevent
economic growth from contracting sharply by assisting workers and businesses that faced
financial strains, and central bankers adjusted monetary policies to address mounting credit
market issues.
In the initial stages of the health crisis, households were concerned about a repeat of the loss of
wealth they experienced during the 2008-2009 financial crisis when the value of their primary
residence dropped sharply. Instead, home prices rose in the United States and Europe as supply
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bottlenecks raised the cost of construction materials and demand for housing increased due in part
to low interest rates. Simultaneously, rising rates of unemployment and job losses raised concerns
that defaults on mortgages and delinquencies on rent payments could increase and would require
some financial institutions to provide loan forbearance or other mechanism to provide financial
assistance. Various central banks offered specific programs to forestall mortgage foreclosures and
rent assistance to prevent an increase in homelessness. In the first stages of the economic
downturn, mortgage defaults threatened to negatively affect the market for mortgage-backed
securities, the availability of funds for mortgages, and negatively affected the overall rate of
economic growth. Losses in the value of most equity markets in the U.S., Asia, and Europe were
projected at that time to affect household wealth, especially that of retirees living on a fixed
income and others who own equities. Subsequently, increased demand for housing outside large
urban areas by workers shifting to at-home work and an increase in prices for construction
materials raised the prices for U.S. housing by an estimated 13.2% in 202024 and contributed to an
increase in U.S. household wealth.25
Within countries, the employment and earnings of youth, women, and the relatively lower-skilled
workers have been affected disproportionately. The two-track nature of the economic recovery
between developed and developing economies combined with new variants of the virus and viral
outbreaks in some major developing economies increased the impact of the crisis on the global
economy and complicated economic forecasts. The IMF estimated in October 2021 the economic
fallout from the pandemic pushed 65 to 75 million people into extreme poverty, reversing a
decades-long trend.26 However, the IMF also concluded that spending on social programs to limit
the impact of the pandemic could reduce the number of people falling into extreme poverty.
In addition to the asynchronous recovery, the IMF concluded that support provided by central
banks may have had unintended consequences of supporting equity valuations that at times may
have been misaligned with their model-estimated fundamentals and may have increased financial
risks overall that could become problematic should interest rates rise.27 These risks could increase
for non-financial firms and households that had high levels of debt relative to income prior to the
pandemic crisis. Accommodative monetary and fiscal policies intended to limit the economic
impact of the crisis may have aided non-financial firms and households, but such support may
also have come at the expense of higher debt levels for most countries and the prospect of a lower
rate of economic growth in the future.28
The staggered economic recovery is projected to widen gaps in living standards between
developed economies and others. Such differences in living standards are estimated to reflect
differences in cumulative per capital income with losses in 2020 to 2022 projected to be
equivalent to 20% of 2019 global GDP, or about $18 trillion. The largest losses are estimated to
fall disproportionately on low-income and emerging market economies. In addition, the IMF
estimated that (1) per capita incomes would remain below the pre-pandemic levels for several
years, adversely affecting productivity; (2) the demands placed on national health systems to

24 Adamczyk, Alicia, The Typical Home Price is Up a Record 13.2% Compared to Last Year, According to Zillow,
CNBC, June 16, 2021. https://www.cnbc.com/2021/06/16/typical-us-home-price-up-record-13point2percent-compared-
to-last-year.html.
25 According to the Federal Reserve, between Q1 2020 and Q1 2021, the value of U.S. household holdings of real estate
increased by nearly 10%, rising to $37.6 trillion and accounting for 84% of household wealth. Financial Accounts of
the United States, Board of Governors of the Federal Reserve System, First Quarter 2021, June 10, 2021.
26 Fiscal Monitor, International Monetary Fund, October 2021, p. 2.
27 Global Financial Stability Report, International Monetary Fund, October, 2021, p. 2.
28 Ibid., p. 36.
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address the pandemic could hinder the treatment of other diseases; (3) business bankruptcies
could reduce productivity; and (4) rising debt levels could crowd out potential borrowing and
investment.29
The IMF urged G-20 leaders to maintain supportive monetary and fiscal policies to lessen the
economic impact of the global recession, In particular, the IMF recommended a combination of
accommodative monetary policies characterized by low interest rates and central bank programs
to facilitate credit availability, a continuation of fiscal support for individuals and firms, and
engagement in a synchronized infrastructure investment program to promote growth. According
to an IMF analysis, all other things being equal, an increase in infrastructure spending by G-20
countries of one-half percent of their GDP in 2021 and 1% in 2022 through 2025 would increase
global GDP by 2% in 2025, compared with under 1.2% growth for an unsynchronized approach.30
On December 2, 2020, IMF Managing Director Kristalina Georgieva indicated the global
financial system had been resilient enough to withstand the impact of the global pandemic, but
she urged policymakers to “act quickly” to return economic growth to its re-pandemic levels and
avoid widespread financial distress.31 The Director reportedly also urged policymakers to take
“urgent, coordinated steps” to deliver investment in digital technology, infrastructure and the
environment. She also indicated the IMF had projected that the loss of global economic output
between 2020 and 2025 as a consequence of the pandemic would total $28 trillion and that 120
million jobs would be lost permanently in the tourism industry alone. The pandemic-related
economic recession raised concerns over the growing debt problems in developing economies,
where the IMF projected that as much as 40% of banks assets were in danger of becoming
distressed.
Impact on Workers
In a report prepared for the January 25-29, 2021, World Economic Forum, the International Labor
Organization (ILO) estimated that 93% of the world’s workers at that time were living under
some form of workplace restrictions as a result of the global pandemic and that 8.8% of global
working hours were lost in 2020 relative to the fourth quarter of 2019, an amount equivalent to
255 million full-time jobs. The ILO estimated the loss in working hours was comprised of (1)
workers who were unemployed, but actively seeking employment, (2) workers who were
employed, but had their working hours reduced, and (3) workers who were unemployed and not
actively seeking employment. Based on this approach, the ILO estimated that unemployment
globally was equivalent to 0.9% of total working hours lost in 2020, while inactivity and reduced
hours accounted for 7.9% of total working hours lost, as indicated in Figure 1.
Total working hours lost in 2020 compared with 2019 were highest in Europe (14.6%) and the
Americas (13.7%), where quarantines and lockdowns had been extensive, followed by lower-
middle income economies. The ILO also estimated that global job losses totaled 114 million jobs
in 2020 relative to 2019. The share of lost worker hours due to higher rates of unemployment
were highest in Europe (6.0%), the Americas (2.7%), including the United States, and Arab States

29 G-20 Surveillance Note, International Monetary Fund, November, 2020, p. 6.
30 Ibid., p. 10.
31 Wheatley, Jonathan, IMF Chief Warns Against Complacency on Global Economy, Financial Times, December 2,
2020. https://www.ft.com/content/fda34b47-33d2-457e-a0b6-45be6001920d.
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(1.7%).32 The ILO also estimated that an increase in global economic activity through part of the
fourth quarter was equal to an increase of 130 million full-time jobs.
Figure 1. Composition of Working-Hours Lost by Region, 2020

Source: ILO Monitor: COVID-19 and the World of Work, International Labor Organization, 2021.
In June 2021, the ILO published an updated report that estimated employment levels globally
remained below pre-pandemic levels through the first half of 2021, due to waves of COVID-19
infectious cases. Consequently, the ILO estimated that working hours fell by 4.8% in the first
quarter of 2021 and by 4.4% in the second quarter of 2021, or an amount equivalent to 140
million jobs and 127 million full-time jobs, respectively. The ILO also estimated the loss in total
hours worked in the first half of 2021 was equivalent to 5.3% loss in global worker income,
exclusive of government transfer payments and benefits, or an amount equivalent to $1.3 trillion.
Despite a projected rebound in job growth in 2021 and 2022, the ILO estimated that employment
levels would fall short by 75 million jobs in 2021 and 25 million in 2022 compared to the number
of jobs that had been projected to be created in the absence of the pandemic.33
Similarly, the OECD estimated in July 2021 the pandemic-related recession cost 22 million jobs
in OECD countries in 2020 and that 114 million jobs had been lost globally, compared with
2019.34 The estimate concluded that unprecedented government fiscal policies supported worker’s
incomes, thereby likely limiting the impact of shutdowns and social restrictions on labor markets.
Nevertheless, the OECD concluded the unique nature of the crisis accentuated and deepened
economic and social divides along skill levels, education, income, and gender bases in OECD
countries and amplified longstanding trends toward increasing economic inequalities in many
OECD countries.35
A number of economists and others estimated that pandemic-related disruptions to labor markets
in developed and developing economies could have long-lasting effects. One group of economists
estimated that even after the pandemic recedes and economic activity ramps up, firms may not
abandon the labor-saving lessons they learned, with fewer jobs created in retail stores, restaurants,

32 ILO Monitor: COVID-19 and the World of Work, Seventh Edition, International Labor Organization, January 15,
2021, p. 2.
33 World Employment and Social Outlook, Trends 2021, International Labor Organization, June 2021.
34 OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, Organization for Economic
Cooperation and Development, July 2021, p. 4.
35 Ibid., p. 5.
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auto dealerships, and meat-packing facilities, among other places.36 Other analysts estimated the
pandemic could affect the structure of work in three main areas by
1. Creating a permanent presence of telework, which could account for 20% to 25%
of workers in developed economies and 20% in developing economies working
from home three to five times per week, which could reduce demand for public
transportation, restaurants, and retail stores;
2. Increasing the level of e-commerce that could disrupt jobs in travel and leisure,
low-wage jobs in brick-and-mortar stores and restaurants, and increase jobs in
distribution centers.
3. Accelerating the adoption of artificial intelligence (AI) and robotics.37
Analysts with the Pew Research Center surveyed American workers in January 2021 who were
unemployed and looking for work. The results indicated that half of those surveyed were
pessimistic about finding another job in the near future and two-thirds had considered changing
their occupations, a sentiment shared across income levels. The other third indicated they had
already engaged in re-skilling through job retraining programs or educational activities.38
U.S. Labor Market
In the United States, labor markets were recovering, but by September 2021 the overall rate of
unemployment remained above pre-pandemic rates. In testimony before the Senate and House in
mid-July 2021, Federal Reserve Chairman Jerome Powell indicated that vaccinations had led to a
reopening of the economy and “strong economic growth and improvements in the labor market,”
but that there was still a long way to go.39 He indicated the rate of unemployment had fallen, but
the rate was still elevated and the official published rate understated the actual shortfall in
employment as a result of a workforce participation rate that remained below pre-pandemic
levels. The Federal Reserve also indicated in an accompanying monetary policy report the
pandemic-related economic recession was disproportionately affecting certain groups in the
economy: lower-wage and less-educated workers, racial and ethnic minorities, and women.40
According to the U.S. Census Bureau, between March 2020 and February 2021, 115 million
Americans experienced a loss in employment income and 37 million qualified for and received
unemployment insurance. In addition, an estimated 26 million households reported receiving
Supplemental Nutritional Assistance Program (SNAP) in February 2021, while nearly 12 million
households with children were estimated not to have had enough to eat.41
Additionally, the Census Bureau data indicated the stimulus checks appropriated under the
COVID-19 Aid, Relief, and Economic Security Act (P.L. 116-136) were used by households to
cover usual expenses such as food, housing, and gas. The Census Bureau reported that

36 Autor, David, and Elizabeth Reynolds, The Nature of Work After the COVID Crisis: Too Few Low-Wage Jobs, The
Hamilton Project, Brookings Institution, July 2020, p. 2
37 McKinsey Global Institute, The Future of Work After COVID-19, February 18, 2021.
38 Parker, Kim, Ruth Igielnik, and Rakesh Kochhar Unemployed Americans are Feeling the Emotional Strain of Job
Loss; Most Have Considered Changing Occupations, Pew Research Center. February 10, 2021.
39 Powell, Jerome, H., Testimony before the House Financial Services Committee and the Senate Committee on
Banking, Housing, and Urban Affairs, July 15, 2021.
40 Board of Governors of the Federal Reserve System, Monetary Policy Report, July 9, 2021.
41 Monte M., Lindsay, Historical Look at Unemployment, Sectors Shows Magnitude of COVID-19 Impact on
Economy, Census Bureau, March 15, 2021, https://www.census.gov/library/stories/2021/03/putting-economic-impact-
of-pandemic-in-context.html.
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 By late summer 2020, 76.5 million American adults reported that it was
somewhat or very difficult for them to pay usual expenses: that number rose to
89.7 million by December 2020.
 Households accumulated debt to meet their usual expenses with roughly 30% of
adults using credit cards, taking out loans or borrowing from family and friends
between June and December 2020 to pay for usual expenses.
 In June 2020, 33.7 million adults were using debt rather than income to pay their
expenses. By late December, that number had increased to 43.7 million adults.
 Households used the second stimulus check under the Consolidated
Appropriations Act of 2021 (P.L. 116-260) to cover usual expenses and reduced
the number of all adults in households struggling to cover usual costs to 80.5
million. Households also used the second stimulus check to pay down debt.42
During the 82-week period from mid-March 2020 to end-October, 2021, 95.8 million Americans
(more than half the 160 million civilian work force) had filed for unemployment insurance at
some point during the preceding 18 months.43 On a seasonally adjusted basis, the number of
insured unemployed individuals was 2.1 million on October 23, 2021, down from a peak of 25
million in mid-May, 2020. As indicated in Figure 2, weekly claims have fallen from the sharp
increases recorded in April and May, 2020. On a week-over-week basis, new claims totaled
269,000 in the week ending October 30, 2021, falling by 14,000 from the previous week’s total of
283,000. This number is above the average number of weekly claims recorded prior to the
pandemic of about 200,000. In the week ending October 16, 2021, 2.7 million people claimed
benefits in all programs, down 158,000 from the previous week’s total.
The insured unemployment rate for the week ending October 23, 2021, was 1.6%, down 0.1
percentage point from the previous week. As workers approached, or surpassed, the traditional
26-week maximum for receiving standard unemployment benefits they had been able to apply for
benefits under the extended Pandemic Emergency Unemployment Compensation (PEUC)
program or the Pandemic Unemployment Assistance (PUA) program.44 Between October 16,
2021, and October 9, 2021, claims under the PEUC program fell by 10,695 to 233.684, while
claims under the PUA program rose by 7,096 to 272,109. Benefits were extended by P.L. 116-
260, signed by President Trump on December 27, 2020. Subsequently, benefits were extended
again through September 6, 2021, by the American Rescue Plan Act of 2021, P.L. 117-2, signed

42 Perez-Lopez, Daniel J. and Lindsay M. Monte, Household Pulse Survey Shows Stimulus Payments Have Eased
Financial Hardship, Census Bureau, March 24, 2021. https://www.census.gov/library/stories/2021/03/many-american-
households-use-stimulus-payments-to-pay-down-debt.html.
43 Unemployment Insurance Weekly Claims, Department of Labor, November 4, 2021. https://www.dol.gov/; Romm,
Tony and Jeff Stein, 2.4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week Total to 38.6
Million, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
44 Both programs were authorized under P.L. 116-136, March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, with benefits ending by December 31, 2020. The PUA program provided 39 weeks of
unemployment assistance, including $600 weekly benefits (expired in August 2020), under certain conditions, for
workers who had exhausted regular unemployment benefits, were not eligible for regular benefits, or were not eligible
for benefits under the PEUC program. On December 27, 2020, President Trump signed the Consolidated
Appropriations Act of 2021 (P.L. 116-260), extending PUA benefits for 11 weeks. The PEUC program provided 13
weeks of additional benefits to individuals who had exhausted standard unemployment assistance and met other
eligibility requirements. Benefits were further extended through September 6, 2021, by the American Rescue Plan Act
of 2021, P.L. 117-2, signed by President Biden on March 11, 2021. DOL, Unemployment Insurance Program Letter
No. 14-21, March 15, 2021; DOL, Unemployment Insurance Program Letter No. 16-20, February 25, 2021.
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by President Biden on March 11, 2021. On September 6, 2021, unemployment benefits under the
two pandemic-related programs expired.
In June, 2021, 26 states announced they were ending early the extended pandemic-related federal
benefits, potentially affecting more than 7.5 million workers. Some state leaders argued the
extended unemployment benefits enabled workers to remain unemployed, thereby creating a
labor shortage and hobbling a return to full economic activity. The nearly equal division of states
between those that maintained and those that ended the pandemic-related unemployment benefits
prior to the September scheduled cutoff provided economists and other analysts the opportunity
to assess the impact of the extended unemployment benefits on employment decisions. In general,
most assessments concluded the benefits played a small role in workers’ decisions to return to
work. Instead, such decisions were prompted by concerns over the spread of the virus, childcare
arrangements, the status of schools openings, and retirements. In some cases, job openings were
filled by individuals who had dropped out of the labor market, rather than by those recently
unemployed, which altered the composition of the labor market rather than changing the rate of
unemployment.45
Figure 2. Weekly Claims for Unemployment Insurance, 2020 and 2021
In millions of individual claims

Source: Department of Labor. Created by CRS.
At the beginning of the pandemic-related economic recession, the Bureau of Labor Statistics
(BLS) reported on May 8, 2020, that 20 million Americans lost their jobs in April 2020 as a
consequence of business lockdowns, pushing the total number of unemployed Americans to 23
million,46 out of a total civilian labor force of 158 million. The increase pushed the national
unemployment rate to 14.7% (with some caveats), the highest since the Great Depression of the
1930s.47 In contrast, on October 8, 2021, BLS reported that nonfarm employment rose by 194,000

45 Iacurci, Greg, 26 States Ended Federal Unemployment Benefits Early. Data Suggests it’s Not Getting People Back to
Work, Bloomberg, August 4, 2021; Smith, Colby and Christine Zhang, End of US’s Extra Unemployment Benefits
Gives Little Boost to Labor Market, Financial Times, September 21, 2021; Ganong, Peter, Pascal J. Noel, and Joseph
S. Vavra, US Unemployment Insurance Replacement Rates During The Pandemic, NBER Working Paper No. 27216,
May 2020; Petrosky-Nadeau, Nicolas and Robert G. Valletta, UI Generosity and Job Acceptance: Effects of the 2020
CARES Act, Working Paper 2021-13, Federal Reserve Bank of San Francisco, June 2021.
46 This total did not include 10.9 million workers who were working part time not by choice and 9.9 million individuals
who were seeking employment.
47 The Employment Situation-September 2020, Bureau of Labor Statistics, October 8, 2020. https://www.bls.gov/.
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in September to reach 147.6 million, rising by less than the previous month’s increase of 366,000;
the total number of unemployed Americans was 7.7 million, down from the previous month’s
total of 8.4 million;48 the unemployment rate fell to 4.8%, again with some caveats.49
Financial Markets
Policymakers and financial and commodity market participants had generally estimated that a
global economic recovery would take hold in the third quarter of 2020. A resurgence in infectious
cases in developed and developing countries starting in September 2020, however, shifted more
of the projected recovery to 2021. Various indicators in the third quarter suggested the worst of
the economic crisis had passed, although the extent and strength of any global economic recovery
remained difficult to predict. As previously indicated, the rate of economic growth slowed in the
fourth quarter of 2020 and through the second quarter of 2021 in Europe and the broader OECD.
The emergence of more infectious strains of the COVID-19 virus pushed governments to
reimpose lockdowns and curtail social and economic activity during the fourth quarter. Updated
forecasts indicate the pandemic affected global economic growth in 2020 less negatively than had
been forecasted in the spring, but that the effects could last longer with a slower rate of growth in
2021 and 2022.
As one indicator of the economic impact of the pandemic, news concerning the pandemic
dominated financial news and at times was a major factor driving market activity. For instance,
the Dow Jones Industrial Average Index (DJIA), along with other market indices, lost one-third of
its value between February 14, 2022 and March 23, 2020. The Index rose steadily between March
and November and rose nearly three percentage points on Monday, November 9, 2020, reportedly
on news that a COVID-19 vaccine had been developed.50 During the period November 3 through
24, the DJIA rose over 9%. On November 24, 2020, the DJIA, along with global equities markets,
increased by 1.5%, and reached an index milestone of 30,000 for the first time and surpassed the
previous high value recorded on February 14, 2020, prior to the pandemic-related economic
shutdown. Reportedly, the rise in market indices reflected a positive assessment by investors of
announcements of effective vaccines against COVID-19, political developments in the United
States, potential additional fiscal measures by governments to stimulate economic activity, and
prospects of stronger economic growth in 2021.51 The DJIA has trended upward during 2021,
rising above 35,000 for the first time on July 23 and rising by over 14% between January 4, 2021,
and September 17.
Prospects of a vaccine initially signaled an eventual end to the business lockdowns and social
restrictions and reduced demands on policymakers to implement additional fiscal and monetary
policies. In places where vaccines have not been broadly distributed, policymakers may have to
continue weighing efforts that balance the competing requirements of households, firms, and state

48 This total does not include 4.5 million workers who were working part time not by choice and 5.7 million individuals
who were seeking employment.
49 The Employment Situation-September 2021. BLS indicated that some individuals had been misclassified in previous
months. Instead of being classified as unemployed, they were misclassified as employed, but absent from work due to
coronavirus-related business closures. If such individuals had been classified as unemployed, the unemployment rate
would have been 5 percentage points higher in April 2020.
50 Telford, Taylor, and Hamza Shaban, “Dow Climbs More Than 800 Points as Vaccine News, Biden Victory Rev Up
Markets,” Washington Post, November 9, 2020. https://www.washingtonpost.com/business/2020/11/09/stocks-
markets-biden-trump-coronavirus/.
51 Smith, Colby, Camilla Hodgson, and Hudson Lockett, US Stocks Set Record High as Investors Look to New
Administration, Financial Times, November 24, 2020. https://www.ft.com/content/433048a5-c489-4ddd-aebd-
d56fb8f3edfc.
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and local governments. Various U.S. states reversed course in late June 2021 to impose or
reimpose social distancing guidelines and close businesses that had begun opening as a result of a
rise in new confirmed cases of COVID-19, raising the prospect of a delayed recovery. A
prolonged recovery could also increase the financial strains on small and medium-sized firms that
face liquidity constraints and the prospects of insolvency.52
Differences in policy approaches between countries initially slowed a coordinated response. This
lack of response may have inflicted longer-term damage to the global economy by impairing
international political, trade, and economic relations, particularly between countries that
promoted nationalism and those that argued for a coordinated international response to the
pandemic. Policy differences also strained relations between developed and developing
economies and between northern and southern members of the Eurozone, challenging alliances
and conventional concepts of national security, and raising questions about the future of global
leadership.
In some countries, the pandemic elevated the importance of public health as a national security
issue and as a national economic priority on a par with traditional national security concerns such
as terrorism, cyberattacks, and proliferation of weapons of mass destruction.53 The pandemic-
related economic and human costs could have long-term repercussions for economies through the
tragic loss of life and job losses that derail careers and permanently shutter businesses. Fiscal and
monetary measures implemented to prevent a financial crisis and sustain economic activity may
have inadvertently worsened income and wealth disparities that were being affected by the
disproportionate impact of quarantines and lockdowns on services sector workers. Within some
countries, the economic fallout may have widened racial and socio-economic cleavages and
increased social unrest.
Economic Policy Responses
After a delayed response, central banks and monetary authorities in developed and emerging
market economies engaged in an ongoing series of interventions in financial markets and national
governments adopted an array of fiscal policy initiatives to stimulate their economies. The Bank
for International Settlements (BIS) characterized the pandemic as fully global in nature, eliciting
a fiscal, monetary, and prudential response that surpassed that of the global financial crisis of
2008-2009. In addition, the BIS argued the evolving nature of the health crisis caused the
financial crisis to evolve as well, changing from a liquidity crisis in the initial stages to a solvency
crisis that could have been worse had the economic recovery been delayed. As global economic
conditions deteriorated in the first quarter of 2020, large internationally active banks tripled the
amount of assets they held as loss provisions, according to BIS.54 With improving economic
conditions in the second quarter, however, banks began reducing their asset holdings and by the
end of 2020, loss provisions had returned to pre-pandemic levels. As a result of the potential
damage to the global economy arising from the pandemic, the BIS stated that future economic
historians may describe the pandemic as, “the defining moment of the 21st century.”55

52 Global Financial Stability Report, International Monetary Fund, October 2020, p. 1.
53 Harris, Shane and Missy Ryan, To Prepare for the Next Pandemic, the U.S. Needs to Change its National Security
Priorities, Experts Say, Washington Post, June 16, 2020. https://www.washingtonpost.com/national-security/to-
prepare-for-the-next-pandemic-the-us-needs-to-change-its-national-security-priorities-experts-say/2020/06/16/
b99807c0-aa9a-11ea-9063-e69bd6520940_story.html.
54 BIS Quarterly Review, March 2021, Bank for International Settlements, p. 10.
55 Annual Economic Report 2020, Bank for International Settlements, June 2020, p. ix.
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For a complete list of actions 193 countries have taken in response to the economic challenge of
COVID-19, see the list compiled by the IMF.56
Industry Measures
During 2020, governments adopted a range of measures at both the national and international
level to address the health and economic consequences of the COVID-19 pandemic, as indicated
in Table 2.57 These measure include incentives to increase domestic production of vaccines and
personal protective equipment (PPE) and direct state intervention through nationalization or
through directives to increase output at facilities that produced PPE materials or to initiate
production at other facilities. In some cases, policy changes included enhanced screening of
foreign investment for “public interest” reasons that may remain as a legacy issue after the
pandemic crisis has been resolved.58
The shift in approach toward the national security dimensions of foreign investment, especially
by developed economies, has blurred the distinction between foreign investment, trade, and
national security and could reflect a fundamental change in the concept of national security
relative to foreign investment. Arguably, changes in technology and the global economy have
made it more difficult to assess the economic costs and benefits of changes in foreign investment
policies taken on national security grounds.
Table 2. Investment Policy Instruments Adopted at the National and International
level to Address the COVID-19 Pandemic
Investment policy areas
Policy measures
Policy actions at the national level
Investment facilitation
Alleviate administrative burdens and bureaucratic
obstacles for firms.

Use of online tools and e-platforms.
Investment retention and aftercare by investment
COVID-19-related information services.
promotion agencies (IPAs)

Administrative and operational support during the
crisis.

Move to online services.
Investment incentives
Financial or fiscal incentives to produce COVID-19-
related medical equipment.

Incentives for conversion of production lines.

Incentives for enhancement of contracted economic
activities.
State participation in crisis-affected industries
Acquisition of equity in companies, including
nationalization.

56 See International Monetary Fund, Policy Responses to COVID-19. https://www.imf.org/en/Topics/imf-and-covid19/
Policy-Responses-to-COVID-19.
57 Countries include Australia, Canada, the European Union, France, Germany, Hungary, Italy, India, Japan, Poland,
and Spain, among others. World Investment Report 2020, United Nations Conference on Trade and Development 2020,
p. 93.
58 World Investment Report 2020, United Nations Conference on Trade and Development, June 16, 2020, p. 96.
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Investment policy areas
Policy measures
Local small and medium enterprises (SMEs) and supply
Financial or fiscal support for domestic suppliers (such
chains
as SMEs).
National security and public health
Application and potential reinforcement of FDI
screening in pandemic-relevant industries.
Other State intervention in the health industry
Mandatory production.

Export bans.

Import facilitation.
Intellectual property (IP)
General authorization of non-voluntary licensing, to
speed up research and development (R&D).

IP holder-specific non-voluntary licensing, to enable
imports of medication.
Policy actions at the international level
International support measures for investment
International pledges in support of cross-border
investment.
IIAs
Reform International Investment Agreements (IIAs) to
support public health policies and to minimize investor–
State dispute risks.
Intellectual property (IP)
General authorization of non-voluntary licensing, to
speed up research and development (R&D).
Source: World Investment Report 2020, United Nations Conference on Trade and Development, June 16, 2020,
p. 89.
Fiscal Measures
As indicated in Table 3, central governments in advanced and emerging economies adopted
various fiscal measures to provide financial support to the health sector, households, and firms,
although the size and scope of the programs vary by country.59 These measures broadly include
tax cuts and tax deferrals for individuals and businesses, wage and income supplements to
individuals, including expanding unemployment insurance, and other payments to businesses.
The U.S. Congress approved historic fiscal spending packages, while other governments
abandoned traditional borrowing caps in order to increase fiscal spending to sustain economic
growth. In some emerging economies, governments reportedly adopted special programs to
provide financial assistance to “informal” workers, or workers outside traditional labor markets
such as family businesses.60
In developed economies, however, as governments adopted fiscal packages to assist households,
consumers sharply increased their savings as they faced limited spending opportunities, or a form
of involuntary saving, and concerns over lost jobs, incomes, and the course of their economies, or
precautionary saving. International organizations also took steps to provide loans and other
financial assistance to countries in need. These and other actions have been labeled
“unprecedented,” a term that has been used frequently to describe the pandemic and the policy
responses.

59 Ibid.
60 Ibid., p. 25.
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Table 3. Elements of Announced Fiscal Measures to Address COVID-19

Advanced Economies
Emerging Market Economies
Measures
US
JP
DE
FR
IT
ES
GB
BR
CN
ID
IN
KR
MX
RU
ZA
Measures supporting the health sector

x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Measures supporting households
Targeted
x
x
x
x
x
x
x
x
x
x
x
x

x
x
transfersa
Other
x
x
x
x
x
x
x
x
x
x
x
x

x
x
labor
income
supportb
Wage
x
x
x
x
x
x
x
x
x

x
x

x
x
subsidies
Tax cuts
x
x
x
x

x

x
x
x
x

x
x
Tax deferral
x
x
x

x
x
x

x
x
x

x
Measures supporting firms
Tax deferral
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Liquidity
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
supportc
Tax cuts
x
x
x

x
x
x
x
x
x
x
x

x

Targeted

x
x
x
x

x

x
x

x
x
transfers
Source: Annual Economic Report 2020, Bank for International Settlements, June 2020, p. 24, based on data
col ected by the International Monetary Fund and the Organization for Economic Cooperation and
Development.
Notes:
a. Includes cash and in-kind transfers to affected households.
b. Extended unemployment and sick leave benefits.
c. Non-budgetary measures such as equity injections, asset purchases, loans and debt assumptions or
government guarantees and contingent liabilities, US: United States; JP: Japan; DE: Germany; FR: France; IT:
Italy; ES: Spain; GB: Great Britain; BR: Brazil; CN: China; ID: Indonesia; IN: India; KR: South Korea; MX:
Mexico; RU: Russia; ZA: South Africa.
Fiscal Deficits
As one measure of the extent of the global fiscal and monetary responses by governments, the
IMF estimated that government spending and revenue measures to sustain economic activity
adopted through September 2021 amounted to $16.9 trillion.61 The IMF also updated its estimate
of the increase in borrowing by governments globally to finance their fiscal responses to rise to
10.2% of global gross domestic product (GDP) in 2020, before falling to 7.9% in 2021 and 5.2%
in 2022, as indicated in Figure 3. Other estimates indicate that central banks have committed $17
trillion to support their economies to counter pandemic-related economic effects.62

61 Fiscal Monitor, International Monetary Fund, October 2021. p. 7.
62 Wigglesworth, Robin, Long Live Jay Powell, the New Monarch of the Bond Market, Financial Times, June 23,
2020. https://www.ft.com/content/5db9d0f1-3742-49f0-a6cd-16c471875b5e.
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Figure 3. IMF Projected Government Fiscal Deficits Relative to GDP
In percentage shares of Gross Domestic Product

Source: Fiscal Monitor, International Monetary Fund, October 2021. Created by CRS.
Notes: Data for 2021 and 2022 are estimates.
Among developed economies, the fiscal deficit to GDP ratio is projected to rise to 10.8% in 2020,
before falling to 8.8% in 2021 and 4.8% in 2022; the ratio for the United States is projected to
rise to 14.9% in 2020, the highest ratio for any country or region, before falling to 10.8% in 2021
and 6.9% in 2022.63 For most areas and countries, the IMF forecasts that debt to GDP ratios will
fall in 2021, but fall more substantially as percentage shares of GDP in 2022 as the economic
recovery is projected to take hold. Some economists and others have raised concerns that fiscal
deficits financed through borrowing in a low-interest rate environment could substantially
increase the debt servicing costs on government budgets under certain conditions, particularly if
national economic growth rates rise, which tend to push up central banks’ interest rates, and if the
accumulated debt is refinanced at those higher rates, thereby increasing debt servicing costs.64
According to the IMF, France, Germany, Italy, Japan, and the United Kingdom announced public
sector support measures in 2020 that total more than 10% of their annual GDP.65 For emerging
market economies, the fiscal deficit to GDP ratio is projected to rise from 9.6% in 2020 to 6.6%
in 2021 and 5.8% in 2022, significantly increasing their debt burden.66 According to some
estimates, the most fiscally vulnerable countries are Argentina, Venezuela, Lebanon, Jordan, Iran,
Zambia, Zimbabwe, and South Africa.67 The IMF concluded that among low-income developing
countries, near-term debt vulnerabilities remain high.68

63 Fiscal Monitor, Table 1.1.
64 Hagaman, Chase, Fiscal, Monetary, and Economic Challenges of the Post-Pandemic Economy, The Concord
Coalition, February 18, 2021, Edelberg, Wendy, and Louise Sheiner, The Macroeconomic Implications of Biden’s $1.9
Trillion Fiscal Package, The Hamilton Project, Brookings Institution, January 28, 2021.
65 Fiscal Monitor, International Monetary Fund, October 2021, p. 3.
66 Ibid., p. 3
67 Wheatley, Jonathan, Tommy Stubbington, Michael Stott, Andrew England, and Joseph Cotterill, Debt Relief: Which
Countries Are Most Vulnerable? Financial Times, May 6, 2020. https://www.ft.com/content/31ac88a1-9131-4531-
99be-7bfd8394e8b9.
68 Global Financial Stability Report, October 2021, p. xi.
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The IMF argued the actions by central banks risked creating a disconnect between the pricing of
risk in financial markets and projected economic prospects, because investors apparently had
expected a quick recovery in 2020 based on continued and unprecedented central bank
intervention. However, a perceived or real shift in central bank intervention in financial markets
could negatively affect investors’ concept of risk and, in turn, negatively affect asset markets and
the economic recovery.69 In addition to central banks’ actions, the IMF concluded that a number
of preexisting vulnerabilities could affect the timing and the rate of the economic recovery. These
vulnerabilities include corporate and household debt levels in developed and some emerging
market economies that could become unmanageable in a prolonged recession; a rising number of
insolvencies that could test the resilience of the banking sector; additional stresses that could
affect nonbank financial institutions; and the prospect of some developing economies facing high
external financing requirements.70
Worker Assistance Programs
As part of their fiscal policy measures, governments in advanced economies either enhanced
existing worker support programs, or adopted new programs. As indicated in Table 4, the OECD
categorized the various job retention programs into six major groups, which the OECD estimated
had supported 60 million workers in developed economies.71As would be expected, programs to
assist workers varied across countries, but they generally were comprised of increased subsidies
for existing programs designed to support workers for work hours lost or extended wage subsidies
to maintain pre-pandemic employment levels. Other programs assisted individual firms in
retaining workers with the objective of facilitating a quick return to full activity once pandemic-
related restrictions are lifted.72 In some cases, benefits were increased by extending the length of
time benefits were available and benefits were extended to workers in non-standard jobs such as
temporary and self-employed workers. New programs adopted by some OECD members were
designed to assist some temporary and non-standard workers quickly gain access to support
funds.73 Some countries also eased qualification requirements to facilitate workers or businesses
gaining access to support funds
In its July 2021 updated employment outlook, the OECD concluded that many workers in OECD
countries had not regained full-time employment by mid-2021 and that elevated rates of
unemployment could persist on average beyond 2022. In addition, the OECD concluded the
longer workers go without regaining employment, the more difficult it could be for them to
compete with those whose jobs had been sustained during the recession and the greater the risks
of a rapid increase in long-term unemployment.74 The OECD also indicated that the timing of any
withdrawal of government fiscal support could affect the timing and strength of a recovery and it
urged governments to continue supporting families most in need of jobs, while providing
incentives for job creation and for returning workers. It also concluded that withdrawing support
too soon “to the many still in need risks generating mass bankruptcies and job losses in sectors

69 Global Financial Stability Report Update, International Monetary Fund, December 2020, p. 4.
70 Ibid., pp. 6-7.
71 OECD Employment Outlook 2021, p. 15.
72 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and
Development, October 12, 2020, p. 2.
73 OECD Employment Outlook 2021, pp. 5-6.
74 Ibid., p. 15.
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still deeply affected by containment measures, making the recovery more difficult and
uncertain.”75
In anticipation of governments reducing or eliminating worker support programs, the OECD
encouraged governments to
 Continue providing support to firms affected by social distancing restrictions and
reducing delays in providing payments.
 Target workers support programs to jobs that are likely to remain viable in the
medium term in firms or sectors where activity can resume.
 Use worker support programs to limit excessive layoffs in cases of temporary
reduction in business activity and not to support firms with structural
difficulties.76
Table 4. Developed Economy Worker Support Programs During COVID-19
Increased
access for
Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Australia
x

Austria
x
x
x

Belgium
x
x
x

Canada
x
x

Chile
x
x
x
x

Czech Republic
x
x
x

Denmark
x
x
x

Estonia
x

Finland
x
x
x
x

France
x
x
x
x

Germany
x
x
x
x

Greece
x

Hungary
x

Iceland
x

Ireland
x
x

Italy
x
x
x

Japan
x
x
x
x

Korea
x
x
x

Latvia
x

Lithuania
x

Luxembourg
x
x
x

75 Ibid., p. 6.
76 Ibid., p. 100.
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Increased
access for
Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Netherland
x
x

New Zealand
x

Norway
x
x
x

Poland
x

Portugal
x
x
x

Slovak Republic
x
x
x

Slovenia
x

Spain
x
x
x
x

Sweden
x
x
x

Switzerland
x
x
x

Turkey
x
x
x

United Kingdom

x

United States
x
x
x

Source: Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic
Cooperation and Development, October 12, 2020, p. 7.
Monetary and Prudential Measures
Among central banks, the Federal Reserve initiated extraordinary steps not experienced since the
2008-2009 global financial crisis to address the economic effects of COVID-19. According to a
March 2021 BIS review of the monetary policies adopted by the central banks of 11 advanced
economies and 28 developing economies between February and July 2020 to address the impact
of the pandemic, the banks moved quickly and on a massive scale,77 as indicated in Table 5.
Central banks in advanced economies acted to prevent a financial crisis by purchasing assets and
providing liquidity at favorable rates. In contrast, central banks in emerging economies responded
less aggressively, in part reflecting the success of advanced economy central banks in easing
global financial pressures, which effectively made it possible for emerging economies to focus
their efforts on supporting domestic demand.
BIS grouped the central bank measures into five categories: (1) interest rates; (2) reserve policies;
(3) lending operations; (4) asset purchases; and (5) foreign exchange policies, including foreign
exchange swaps. In some cases, central banks also relaxed capital buffers and countercyclical

77 Cantu, Carlos, Paolo Cavalino, Fiorella De Fiore, and James Yetnam, A Global Database of Central Banks’
Monetary Responses to COVID-19, BIS Working Papers No. 934, Bank for International Settlements, March 2021, p.5.
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capital buffers,78 adopted after the 2008-2009 financial crisis.79 Generally, however, banks did not
use their capital buffers to supply credit in their respective economies.80
The five policy areas identified by BIS are
 Interest rates. Interest rates were reduced in most countries, except in Japan and
the Euro area, where interest rates were zero. In numerous countries, monetary
authorities attempted to ease the concerns of financial market participants by
announcing they would maintain accommodative policies (low interest rates) for
an extended period.
 Reserve policies. With low interest rates, some central banks adjusted reserve
requirements for commercial banks, which alters the amount of assets banks are
required to hold. Some central banks also adjusted the remuneration rate, or the
rate the central bank uses to pay interest on required and excess reserves. Some
banks also changed compliance requirements, or the types of assets that could be
counted as reserves.
 Lending operations. Central banks adjusted lending facilities to maintain
liquidity, either by expanding existing lending facilities or by creating new
programs, which accounted for 60% of lending operations. In some cases,
policies were targeted to specific financial market segments, particularly banks
and small and medium-sized enterprises.
 Asset purchases. Central banks in advanced economies used targeted and non-
targeted lending operations to support monetary policies and maintain liquidity in
the financial system. These goals were accomplished by increasing the size of
existing programs and by lengthening the maturities of loans. Central banks in
emerging economies expanded their existing liquidity facilities by lowering
interest rates, broadening the types of eligible collateral, and increasing the
number and types of eligible counterparties. The main difference between
existing and new lending policies was that a large share of the new facilities
targeted the private sector, including lending measures to support the flow of
credit to households and non-financial corporations. In advanced economies
about 40% of asset purchase programs were new facilities, while the share of
new programs in emerging economies accounted for over 90%. In addition, asset
purchases were split nearly evenly between public and private assets in advanced
economies
 Foreign exchange. The Federal Reserve implemented foreign exchange swaps
initially with five countries (Canada, Euro area, Japan, UK, Switzerland),
followed by swap lines extended to nine other countries (Australia, Brazil, Korea,
to relieve pressure in the dollar funding market.
Throughout the early stages of the economic crisis, central banks served as lenders of last resort
through large purchases of government debt and as the buyers or lenders of last resort for private

78 Countercyclical capital buffers require banks to increase their capital buffers during periods of rapid growth in assets
(when they are making a lot of loans), to ensure they have sufficient capital to absorb losses during a recession.
Countercyclical Capital Buffers, Bank for International Settlements, April 3, 2020. https://www.bis.org/bcbs/ccyb/.
79 Arnold, Martin, “Regulators Free up $500bn Capital for Lenders to Fight Virus Storm,” Financial Times, April 7,
2020. https://www.ft.com/content/9a677506-a44e-4f69-b852-4f34018bc45f.
80 Lessons Learnt From the COVID-19 Pandemic From a Financial Stability Perspective: Interim Report, Financial
Stability Board, July 13, 2021, p. 9.
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sector securities, in many cases engaging in activities that previously had been considered off-
limits.81 As a result of these activities, the BIS argued that central banks effectively managed the
initial liquidity crisis, the first of three phases often identified with financial crises. The second
and third phases, insolvency and recovery, were also navigated successfully, but could still
become more challenging the longer the pandemic-related economic crisis persists. Capital
buffers were raised after the 2008-2009 financial crisis to assist banks in absorbing losses and
staying solvent during financial crises. Some governments directed banks to freeze dividend
payments and halt pay bonuses. The Financial Stability Board (FSB) argued in its July 13, 2021,
report to the G-20 Finance Ministers and Governors that the monetary and fiscal actions taken by
central banks and national governments, respectively, in combination with regulatory and
supervisory measures adopted following the 2008-2009 global financial crisis effectively
contained the impact of the crisis, supported the functioning of the global financial system, and
facilitated funding to the real economy.82
Since the beginning of the pandemic, central banks often adopted similar policies, although not
always in unison. Most central banks followed the Federal Reserve in cutting interest rates as one
of their main policy tools to support economic activity; the ECB (Euro Area) and Japan are
notable exceptions, since they had reduced their main interest rates to zero prior to the economic
recession. The low interest rates had an additional, although not necessarily intended, impact on
currency markets by reducing arbitrage opportunities and, thereby, reducing volatility in
exchange rates.83 According to some analysts, the period through mid-summer 2021 experienced
the longest period on record of low volatility between the dollar and the euro.
Table 5. Selected Central Bank and Prudential Measures to Address COVID-19
Advanced Economies
Tool type
Measure
US
EA
JP
GB
CA
AU
CH
DK
NO
NZ
SE
Interest
Policy Rate cut
X

X
X
X

X
X
X
Lending
Liquidity provision
X
X
X
X
X
X

X
X
X
X
operations
Targeted lending
X
X
X
X

X
X

X
X
Asset
Government
X
X
X
X
X
X

X
X
purchases
bonds
Corporate paper
X
X
X
X
X

X
Corporate bonds
X
X
X
X
X

X
Other

X
X

X

X
Foreign
US dol ar swap line

X
X
X
X
X
X
X
X
X
X
exchange
Swaps

Spot intervention

X

Reserve
Remuneration

X
X

X

policy
Required Ratio
X

Compliance

81 For a review of monetary policies of the Federal Reserve, the ECB, the Bank of Japan, and the Bank of England, see
Haas, Jacob, Christopher J. Neely, William B. Emmons, Responses of International Central Banks to the COVID-19
Crisis, Federal Reserve Bank of St. Louis Review, Fourth Quarter 2020.
82 Lessons Learnt From the COVID-19 Pandemic, p. 10.
83 Duguid, Kate and Tommy Stubbington, Central Bank Sync Puts Foreign Exchange Market to Sleep, Financial
Times, September 21, 2021.
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Middle East and Asia
Tool type
Measure
AE
DZ
IL
KW MA
SA
TR
ZA

Interest
Policy Rate cut
X
X
X
X
X
X
X
X

Lending
Liquidity provision

X
X
X
X
X
X
X

operations

Targeted lending
X

X

X
X
X

Asset
Government

X

X
X

purchases
bonds
Corporate paper

Corporate bonds

X

Other

Foreign
US dol ar swap line

exchange

Swaps

X

Spot intervention

X

Reserve
Remuneration

X

policy

Required Ratio
X
X

X

Compliance

Emerging Asia
Tool type
Measure
CN
HK
ID
IN
KR
MY
PH
SG
TH
VN

Interest
Policy Rate cut
X
X
X
X
X
X
X

X
X

Lending
Liquidity provision
X
X
X
X
X

X

X

operations
Targeted lending
X

X
X

X
X
X
X

Asset
Government

X
X
X

X

X

purchases
bonds
Corporate paper

X

Corporate bonds

X

X

Other

Foreign
US dol ar swap line

X

X

exchange
Swaps

X
X

X

Spot intervention

X
X

Reserve
Remuneration

X

policy
Required Ratio
X
X
X
X

Compliance

X
X

Latin America

Eastern Europe
Tool type
Measure
AR
BR
CL CO
MX
PE

CZ
HU
PL
RO
Interest
Policy Rate cut
X
X
X
X
X
X

X
X
X
X
Lending
Liquidity provision

X
X
X
X
X

X
X
X
X
operations

Targeted lending
X
X
X

X
X

X

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Asset
Government

X
X

X
X
X
purchases
bonds

Corporate paper

Corporate bonds

X

Other

X
X

X

Foreign
US dol ar swap line
X

X

exchange

Swaps

X
X
X
X
X

X

Spot intervention

X

X

Reserve
Remuneration
X
X

X
X

policy

Required Ratio
X
X

X
X
X

X

Compliance
X
X

X

Source: Cantu, Carlos, Paolo Cavalino, Fiorella De Fiore, and James Yetnam, A Global Database of Central Banks’
Monetary Responses to COVID-19, BIS Working Papers No. 934, Bank for International Settlements, March 2021,
p. 5.
Notes: AE: United Arab Emirates; AR: Argentina; AU: Australia; BR: Brazil; CA: Canada; CH: Switzerland; CL:
Chile; CN: China; CO: Colombia; CZ: Czech Republic; DK: Denmark; DZ: Algeria; EA: Euro Area; GB: Great
Britain; HK: Hong Kong; HU: Hungary; ID: Indonesia; IL: Israel; IN: India; JP: Japan; KR: South Korea; KW:
Kuwait; MA: Morocco; MY: Malaysia; MX: Mexico; NO: Norway; NZ: New Zealand; PE: Peru; PH: the
Philippines; PL: Poland; RO: Romania SG: Singapore; SA: Saudi Arabia; SE: Sweden; TH: Thailand; TR: Turkey; US:
United States; VN: Vietnam; ZA: South Africa;
Economic Forecasts
Global Growth
As the COVID-19 pandemic began, the global economy was struggling to regain a broad-based
recovery. Global economic growth was being challenged by the lingering impact of growing trade
protectionism, trade disputes among major trading partners, falling commodity and energy prices,
and economic uncertainties in Europe over the impact of the UK withdrawal from the European
Union. Individually, each of these issues presented a solvable challenge for the global economy.
Collectively, however, the issues weakened the global economy and reduced the available policy
flexibility of many national leaders, especially among the leading developed economies. While
the economic impact has become less uncertain, the combination of policy responses may
continue to have a significant and enduring impact on the way businesses organize their work
forces, on global supply chains, and on government responses to a global health crisis.84 As a
result of the rapidly spreading virus and its compounding effects on global and national rates of
economic growth, forecasting the impact of the virus has been especially challenging.
In the early stages of the global economic recession, economic forecasts were compounded
further by a historic drop in the price of crude oil. Since then, oil prices recovered from the low of
nearly $20 per barrel in April 2020 to a range of $40 to $45 per barrel by the end of 2020, in part
reflecting the decline in global economic activity. By early June 2021, the international price of

84 Rowland, Christopher and Peter Whoriskey, “U.S. Health System is Showing Why It’s Not Ready for a COVID-19
Pandemic,” Washington Post, March 4, 2020. https://www.washingtonpost.com/business/economy/the-us-health-
system-is-showing-why-its-not-ready-for-a-COVID-19-pandemic/2020/03/04/7c307bb4-5d61-11ea-b29b-
9db42f7803a7_story.html.
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Brent crude oil had crossed the $70 per barrel mark, where it remained through early October,
when it rose above $80 dollars per barrel.
Through the first half of 2021, economic forecasts turned more positive based on an expected
return to pre-pandemic rates of growth. Nevertheless, the economic situation has remained highly
fluid globally and for most countries and regions. Uncertainty about the length and depth of the
health crisis-related economic effects continue to influence perceptions of risk and volatility in
financial markets and corporate decision-making. In addition, uncertainties concerning the global
pandemic and the effectiveness of public policies intended to contain its spread and prevent a
subsequent round of infections have added to market volatility. At various times, corporations
postponed investment decisions, laid off workers who previously had been furloughed, and in
some cases filed for bankruptcy.
Progress in producing and administering vaccines through the first half of 2021 raised prospects
that social distancing rules could be relaxed or removed, which could improve economic activity.
Most forecasts indicate that 2021 GDP growth rates for most countries could outpace pre-
pandemic forecasts; while economic growth in 2022 could return to more historic rates. However,
these forecasts may be dampened by: a resurgence in viral cases that could move governments to
reinstate business and social lockdowns, continuing shortfalls in supplies through supply chains
that have not fully recovered, and rising demand for construction materials that is driven by
government infrastructure projects and new residential housing construction.
The IMF, the OECD, and The World Bank revised their forecasts downward between late 2019
and mid-2020, reflecting the rapidly deteriorating state of the global economy and a marked
decline in projected rates of growth. Between October 2019 and January 2021, for instance, the
IMF lowered its global economic growth forecast for 2020 from a positive 3.4% to a negative
3.5%. In its June 2020 forecast, the OECD forecasted the effects of a single and double wave of
infections, with the projections for a single wave reflected in Table 6. By late 2020 and early
2021, most forecasts were revised upward to reflect assessments the recession would be less
severe than had been forecasted for 2021, as indicated in Figure 4. The OECD estimated in May
2021 that global GDP had declined by 3.5% in 2020, compared with a December forecast
of -4.2%, and would experience a stronger recovery in 2021 of 5.8% instead of a March forecast
of 5.6%.85 Between January 2020 and January 2021, the World Bank also lowered its forecast of
global growth from 2.5% to a negative 4.3%. In most forecasts, advanced economies were
projected to experience the steepest declines in economic growth from 2019 to mid-June 2020.
Table 6. Major Economic Forecasts
Percentage changes at annual rates
World
Advanced economies Developing economies
United States

2020 2021
2020
2021
2020
2021
2020
2021
International Monetary Fund
October 2019
3.4%
3.6%
1.7%
1.6%
4.6%
4.8%
2.1%
1.7%
April 2020
-3.0
5.8
-6.1
4.5
-1.0
6.6
-5.9
4.7
June 2020
-4.9
5.4
-8.0
4.8
-3.0
5.9
-8.0
4.5
October 2020
-4.4
5.2
-5.8
3.9
-3.3
6.0
-4.3
3.1

85 OECD Economic Outlook, Interim Report March 2021, Organization for Economic Cooperation and Development,
March, 2021.
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World
Advanced economies Developing economies
United States

2020 2021
2020
2021
2020
2021
2020
2021
January 2021
-3.5
5.5
-4.9
4.3
-2.4
6.3
-3.4
5.1
July 2021
-3.2
6.0
-4.6
5.6
-2.1
6.3
-3.5
7.0
October 2021
-3.1
5.9
-4.5
5.2
-2.1
6.4
-3.4
6.0
Organization for Economic Cooperation and Development
Nov 2019
2.9
3.0
1.6
1.7
4.0
4.0
2.0
2.0
March 2020
2.4
3.3
0.8
1.2
NA
NA
1.9
2.1
June 2020 single
-6.0
5.2
-7.5
4.8
-4.6
5.6
-7.3
4.1
June 2020 double
-7.6
2.8
-9.3
2.2
-6.1
3.2
-8.5
1.9
Sept. 2020
-7.6
2.8
-9.3
2,2
-6.1
3.2
-8.5
1.9
Dec. 2020
-4.2
4.2
-5.5
3,2
-3.0
5.1
-3.7
3.2
March 2021
-3.4
5.6
NA
NA
NA
NA
-3.5
6.5
May 2021
-3.5
5.8
-4.8
5.3
-2.3
6.2
-3.5
6.9
September 2021
-3.4
5.7
NA
NA
NA
NA
-3.4
6.0
World Bank
January 2020
2.5
2.6
1.4
1.5
4.1
4.3
1.8
1.7
June 2020
-5.2
4.2
-7.0
3.9
-2.5
4.6
-6.1
4.0
January 2021
-4.3
4.0
-5.4
3.3
-2.6
5.0
-3.6
3.5
Sources: World Economic Outlook, various issues, International Monetary Fund; OECD Economic Outlook, various
issues, Organization for Economic Cooperation and Development; Global Economic Prospects, various issues,
World Bank.
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Figure 4. Major Economic Forecasts by Region
Projections in annual percent change

Source: OECD Economic Outlook, March 2021, Organization for Economic Cooperation and Development.
March 2021; World Economic Outlook, Update, International Monetary Fund, October 2021; Global Economic
Prospects, World Bank Group, January 2021. Created by CRS.
Notes: The OECD estimated rates of growth as a result of two scenarios, indicated as OECD1 and OECD2.
The first scenario assumes there is a single wave of infections from COVID-19, while the second scenario
estimated the effect of a two-wave scenario.
The OECD Forecast
The Organization for Economic Cooperation and Development (OECD) released an updated
forecast in September 2021, which estimated that global economic growth had declined by 3.4%
in 2020, but also estimated that the global economy would grow at an annual rate of 5.7% in 2021
and 4.5% in 2022, assuming continued strong support from macroeconomic policies and
accommodative monetary policies.86 In the updated forecast, the rate of GDP growth in the Euro
area was forecast to grow at a rate of 5.3% in 2021 and the U.S. economy would grow at rate of
6.0%. The G20, which includes both developed and major developing economies, was projected
to grow by 6.1% in 2021 and by a rate of 4.8% in 2022. The OECD estimated that global GDP
had surpassed the pre-pandemic level, but that output levels and employment in mid-2021
remained 3.5% below pre-pandemic projections, which was estimated to be equivalent to an
income loss of about $4.5 trillion, or the value of a year of global GDP growth. While inflation
began rising in developed economies, the OECD attributed the price increases to higher
commodity and shipping costs and projected they would moderate by the end of 2022, unless
higher rates of inflation became embedded in demands for higher wages.87
The OECD forecast also reflected recent analysis that an economic recovery would take place
over the next two years, but that “the recovery would be uneven across countries, potentially

86 OECD Economic Outlook, Interim Report: Keeping the Recovery on Track, Organization for Economic Cooperation
and Development, September 2020.
87 According to OECD calculations, global commodity prices were 55% higher in July and August 2021 than in the
previous year and were driven by higher metals and oil prices; containerized freight prices were estimated to be two to
three times the level of the previous year. Ibid., p. 11.
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leading to lasting changes in the world economy.”88 In addition, the OECD concluded the
pandemic is fragmenting the global economy through a growing number of trade and investment
restrictions and diverging policy approaches that are being implemented on a country-by-country
basis. The OECD concluded further that
as long as the vast majority of the global population is not vaccinated, all of us remain
vulnerable to the emergence of new variants. Confidence could be seriously eroded by
further lockdowns, and a stop-and-go of economic activities. Firms, so far well protected
but often with higher debt than before the pandemic, could go bankrupt. The most
vulnerable members of society would risk further suffering from prolonged spells of
inactivity or reduced income, exacerbating inequalities, across and within countries, and
potentially destabilizing economies.89
As a consequence of the slowdown in economic activity in the fourth quarter of 2020 and
projected slow growth and partial recovery in 2021, the OECD estimated there would be long-
lasting effects on the global economy, including
 Output was projected to remain around 5% below pre-crisis expectations in many
countries in 2022, raising the specter of substantial permanent costs,
disproportionately affecting vulnerable populations.
 Smaller firms and entrepreneurs are more likely to go out of business.
 Many low wage earners who lost their jobs and are only covered by
unemployment insurance, at best, with poor prospects of finding new jobs
quickly.
 People living in poverty and usually less well covered by social safety nets
experienced a deterioration in their living standards.
 Children and youth from less well-off backgrounds, and less qualified adult
workers struggled to learn and work from home, with potentially long lasting
damage.90
Through the third and fourth quarters of 2020 and the first and second quarters of 2021, most
OECD countries had not experienced extended periods of high rates of unemployment, in part
due to national income and wage maintenance programs, as indicated in Figure 5. The main
exceptions were the United States and Canada, where unemployment rates spiked starting at the
end of the first quarter 2020 and into the second quarter of 2020. By August 2021, most OECD
economies had unemployment rates in the 6.5% to 9.0% range with some exceptions: Japan
(2.8%) and Germany (3.6%) had rates below the OECD average of 6.2%, while Greece (14.6%),
Spain (14.3%), Colombia (13.7%), and Italy (9.3%) had rates that were higher than the OECD
average. In a major difference between U.S. and EU data, EU workers absent from work due to
temporary layoff are counted as employed, whereas, in the United States, they are counted as
unemployed.

88 OECD Economic Outlook, Interim Report March 2021, Organization for Economic Cooperation and Development.
March 2021, p. 4. http://www.oecd.org/economic-outlook/#resources.
89 OECD Economic Outlook May 2021, Preliminary Version, p. 9.
90 Ibid., p. 8.
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Figure 5. Unemployment Rates Among Major OECD Countries
In percentage terms

Source: OECD Dataset: Short-term Labor Market Statistics, Organization for Economic Cooperation and
Development. Created by CRS.
The OECD estimated that global trade would contract by 9.5% in 2020 assuming the global
economy did not experience a strong second wave of infections that caused countries to reimpose
stringent social and business lockdowns, as indicated in Table 7.91 In addition to current rates of
unemployment, the OECD projected the length of time it could take in quarters, or three-month
periods, from the end of 2019 to the second quarter of 2025 for selected OECD countries to return
to full employment, as indicated in Figure 6. The OECD estimated in its July 2021 Employment
Outlook that by the end of 2020, around 22 million jobs had been lost in the OECD compared to
2019. The estimate indicates that four countries-Australia, Japan, New Zealand, and Poland-
could reach pre-pandemic rates of unemployment by mid-2021, or a year and a half after the start
of the recession. On the other hand, OECD countries on average would not reach pre-pandemic
level of unemployment until after the end of 2022, or three years after the start of the recession.92
Other counties were projected not to reach pre-pandemic levels of unemployment until mid-
2024, or more than four years after the recession began. The OECD indicated the delay in
returning to full employment reflected challenges that long-term unemployment present for
workers attempting to reenter the workforce.93

91 Ibid., p. 13.
92 OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, Organization for Economic
Cooperation and Development, July 17, 2021, p. 4.
93 Ibid., pp. 39-40.
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Figure 6. Projected Time to Full Recovery in Employment in Selected OECD
Countries
Periods are in quarters by year Q4 2019 to Q2 2025

Source: OECD Employment Outlook 2021.

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Table 7. OECD, IMF and World Bank Economic Forecasts
Percentage change in Real GDP Growth
OECD Sep. 2021
IMF Oct. 2021
World Bank Jan.

Projections

Projections

2021 Projections
2020
2021
2022
2020
2021
2022

2019
2020
2021

World
-3.4%
5.7%
4.5%
World
–3.1
5.9
4.9
World
2.3%
-4.3%
4.0%
Adv. Economies
-4.8
5.3
3.8
Adv. Economies
–4.5
5.2
4.5
Adv. Economies
1.6
-5.4
3.3
Australia
-2.5
4.0
3.3
United States
–3.4
6.0
5.2
United States
2.2
-3.6
3.5
Canada
-5.3
5.4
4.1
Euro Area
–6.3
5.0
4.3
Euro Area
1.3
-7.4
3.6
Euro area
-6.5
5.3
4.6
Germany
–4.6
3.1
4.6
Japan
0.3
-5.3
2.5
Germany
-4.9
2.9
4.6
France
–8.0
6.3
3.9
Emerging
3.6
-2.6
5.0
France
-8.0
6.3
4.0
Italy
–8.9
5.8
4.2
E. Asia
5.8
0.9
7.4
Italy
-8.9
5.9
4.1
Spain
–10.8
5.7
6.4
China
6.1
2.0
7.9
Spain
-10.8
6.8
6.6
Japan
–4.6
2.4
3.2
Indonesia
5.0
-2.2
4.4
Japan
-4.6
2.5
2.1
United Kingdom
–9.8
6.8
5.0
Thailand
2.4
-6.5
4.0
Korea
-0.9
4.0
2.9
Canada
–5.3
5.7
4.9
Cen. Asia
2.3
-2.9
3.3
Mexico
-8.3
6.3
3.4
China
2.3
8.0
5.6
Russia
1.3
-4.0
2.6
Turkey
1.8
8.4
3.1
India
–7.3
9.5
8.5
Turkey
0.9
0.5
4.5
United
-9.8
6.7
5.2
Russia
–3.0
4.7
2.9
4.5
-3.4
3.5
Kingdom
Poland
United States
-3.4
6.0
3.9
Latin America
–7.0
6.3
3.0
Brazil
1.4
-4.5
3.0
Argentina
-9.9
7.6
1.9
Brazil
–4.1
5.2
1.5
Mexico
-0.1
-9.0
3.7
Brazil
-4.4
5.2
2.3
Mexico
–8.3
6.2
4.0
Argentina
-2.1
-10.6
4.9
China
2.3
8.5
5.8
Mid. East
–2.8
4.1
4.1
Mid. East
0.1
-5.0
2.1
India
-7.3
9.7
7.9
Saudi Arabia
–4.1
2.8
4.8
Saudi Arabia
0.3
-5.4
2.0
Indonesia
-2.1
3.7
4.9
Africa
–1.7
3.7
3.8
Iran
-6.8
-3.7
1.5
CRS-33

OECD Sep. 2021
IMF Oct. 2021
World Bank Jan.

Projections

Projections

2021 Projections
2020
2021
2022
2020
2021
2022

2019
2020
2021

S. Africa
-7.0
4.6
2.5
Nigeria
–1.8
2.6
2.7
Egypt
5.6
3.6
2.7

S. Africa
–6.4
5.0
2.2
S. Asia
4.4
-6.7
3.3

World Trade
–8.2
9.7
6.7
Volume
India
4.2
-9.6
5.4

Oil prices ($)
–32.7
59.1
–1.8
Pakistan
1.9
-1.5
0.5

Bangladesh
8.2
2.0
1.6

Africa
2.4
-3.7
2.7

Nigeria
2.2
-4.1
1.1

S. Africa
0.2
-7.8
3.3

Angola
-0.9
-4.0
0.9
Sources: OECD Economic Outlook: Interim Report, Organization for Economic Cooperation and Development, September 2021; World Economic Outlook, International
Monetary Fund, October, 2021; Global Economic Prospects, World Bank Group, January 2021.

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Among developing and emerging economies, the economic downturn is projected to most
negatively affect countries that rely on commodity exports to support annual economic growth. In
addition to lower prices for commodity exports and reduced global demand for exports,
developing countries are projected to be negatively affected by reduced remittances, weaker
currencies and tighter financial conditions.
The OECD also concluded that
 Real per capita income in 2020 was projected to decline by 8%, with substantial
declines in all economies. Even with an economic recovery in 2021, real per
capita income was projected to rise to only that of 2013.
 Unemployment was projected to rise to its highest level in more than 25 years in
2020, while the average unemployment rate was projected to rise to 7.4% in
2021and 6.9% in 2022. The OECD concluded that, “scarring effects from job
losses are likely to be felt particularly by younger workers and lower-skilled
workers, with attendant risks of many people becoming trapped in joblessness for
an extended period.”
 Net productive investment (business and government) was weak prior to the
pandemic, falling behind the average rate of investment during the previous
decade. Investment was forecast to contract by half in 2020 as a percent of real
GDP, falling from 4.7% to 2.3% and 2.0%, respectively for the one-wave and
two-wave scenarios and increasing the risk of entrenched weak economic
growth. Investment is also expected to be negatively affected by bankruptcies
and insolvencies among corporations and financial institutions.94
Through its various forecasts, the OECD has estimated that increased direct and indirect
economic costs through global supply chains, reduced demand for goods and services, and
declines in tourism and business travel mean that, “the adverse consequences of these
developments for other countries (non-OECD) are significant.”95 Global trade, measured by trade
volumes, slowed in the last quarter of 2019 and had been expected to decline further in 2020, as a
result of weaker global economic activity associated with the pandemic, which is negatively
affecting economic activity in various sectors, including airlines, hospitality, ports, and the
shipping industry.96
According to the OECD’s assessment
 The greatest impact of the containment restrictions has been on retail and
wholesale trade, and in professional and real estate services, although there are
notable differences between countries.
 Countries dependent on tourism have been affected more severely, while
countries with large agricultural and mining sectors experienced less severe
effects.
 Economic effects likely varied across countries reflecting differences in the
timing and degree of containment measures.97

94 Ibid., p. 31.
95 OECD Interim Economic Assessment: COVID-19: The World Economy at Risk, Organization for Economic
Cooperation and Development. March 2, 2020, p. 2.
96 Ibid., p. 4.
97 Evaluating the Initial Impact of COVID Containment Measures on Activity, Organization for Economic Cooperation
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In addition, the OECD argued that China’s emergence as a global economic actor marked a
significant departure from previous global health episodes. China’s growth, in combination with
globalization and the interconnected nature of economies through capital flows, supply chains,
and foreign investment, magnify the cost of containing the spread of the virus through
quarantines and restrictions on labor mobility and travel.98 China’s global economic role and
globalization mean that trade has played a role in spreading the economic effects of COVID-19.
More broadly, the economic effects of the pandemic were spread through three trade channels:
(1) directly through supply chains as reduced economic activity spread from intermediate goods
producers to finished goods producers; (2) as a result of a drop overall in economic activity,
which reduced demand for goods in general, including imports; and (3) through reduced trade
with commodity exporters that supplied producers, which, in turn, reduced their imports and
negatively affected trade and economic activity of exporters.
The IMF Forecast
Having labeled the projected decline in global economic activity as the “Great Lockdown,” the
IMF released an updated forecast in October 2021. The IMF concluded in its revised forecast that
the global economy was recovering, but cautioned the recovery was hobbled by renewed waves
of infections and new variants of the virus.99 The updated forecast estimated a slightly slower rate
of growth in advanced economies than that forecasted in April 2021 and a slower rate of growth
for emerging and developing economies. IMF concluded that health risks continue to abound and
are holding back a full return to economic activity. In addition, the IMF concluded that pandemic
outbreaks in critical links of global supply chains have “resulted in longer-than-expected supply
disruptions,” which are feeding inflation in many countries. The IMF concluded that “risks to
economic prospects have increased and policy trade-offs have become more complex.”100
In its baseline forecast, the IMF estimated the global rate of economic growth declined by 3.2%
in 2020, slightly less negative than its April forecast of -3.5%, before growing by 6.0% in 2021
and 4.9% in 2022, revised upward from its previous forecast. Global trade was projected to fall in
2020 by 8.2% and oil prices were projected to fall by 32.7%. For 2021 and 2022, the IMF
forecast indicated that global trade could grow by 9.7% and 6.7%, respectively, and that oil prices
could rebound by 59.0% in 2021, before falling by 1.8% in 2022. The forecast also indicated the
economic recovery will be uneven across countries depending on, “access to medical
interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural
characteristics entering the crisis.” India and China, in particular, were projected to outpace the
rate of global economic growth, experiencing a rate of growth in 2021 of 9.5% and 8.0%,
respectively.
The IMF’s forecasts reflect the impact of policy measures on the U.S. economy in the first half of
2020 that are larger than it had assumed in its earlier forecasts, a slower recovery in the second
half of 2020, and the impact of U.S. spending measures adopted in 2021. Also, the IMF forecast
reflects an estimated larger decline in consumption than previously assumed as consumers
curtailed spending to increase their savings and the effects of social distancing on economic
activity. The IMF also stated that many countries have faced a multi-layered crisis that included a
health crisis, a domestic economic crisis, falling external demand, capital outflows, and a collapse
in commodity prices. In combination, these various effects interacted in ways that made

and Development, March 27, 2020.
98 Goldin, Ian, “COVID-19 Shows How Globalization Spreads Contagion of All Kinds,” Financial Times, March 2,
2020. https://www.ft.com/content/70300682-5d33-11ea-ac5e-df00963c20e6.
99 World Economic Outlook, International Monetary Fund, October, 2021.
100 Ibid., p. xiii.
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forecasting difficult. As a result, the IMF indicated its forecast depends on a number of factors,
including
 The length of the pandemic and required lockdowns.
 Voluntary social distancing, which affects consumer spending.
 The ability of displaced workers to secure employment, possibly in different
sectors.
 The long-term impact of firm closures and unemployed workers leaving the
workforce, compounding the ability of the economy to recover.
 The impact of changes to strengthen workplace safety—such as staggered work
shifts, enhanced hygiene and cleaning between shifts, new workplace practices
relating to proximity of personnel on production lines—which incur business
costs.
 Global supply chain reconfigurations that affect productivity as companies try to
enhance their resilience to supply disruptions.
 The extent of cross-border spillovers from weaker external demand as well as
funding shortfalls.
 A resolution of the current disconnect between rising asset values, as reflected in
market indices, and forecasts of a synchronized downturn in global economic
activity.
The IMF forecasted indicated that advanced economies as a group experienced an economic
contraction in 2020 of 4.5% of GDP, with a rebound of 5.2% in 2021 and 4.5% in 2022; the U.S.
economic rate of growth was estimated to have declined in 2020 by -3.4%, greater than the rate of
decline experienced in 2009 during the financial crisis, but grow by 6.0% in 2021 and 5.2% in
2022, as indicated in Figure 7. The rate of economic growth in Euro area GDP in 2020 was
projected to decline by 6.3%, but grow by 5.0% in 2021 and 4.3% in 2022. Most developing and
emerging economies were projected to experience a decline in the average rate of economic
growth of -2.0% in 2020, reflecting tightening global financial conditions and falling global trade
and commodity prices, but grow at a rate of 6.0% in 2021 and 3.6% in 2022. In contrast, China
was projected to experience small, but positive rate of growth in 2020 of 2.3% and by 8.0% in
2021 and 5.6% in 2020, while India’s rate of growth was projected to decline by 7.3% in 2020
and grow by 9.5% in 2021 and 8.5% in 2020. The IMF estimated that recovery of the global
economy could be weaker than projected as a result of lingering uncertainty about possible
contagion, lack of confidence, and permanent closure of businesses and shifts in the behavior of
firms and households.101
The IMF concluded that fiscal and monetary actions by developed economies provided
developing and emerging market economies the ability to avoid tightening monetary policy to
stem capital outflows. Instead, the countries relied on movements in their exchange rates to carry
the brunt of the economic adjustment, while also following developed economies in easing
monetary policy, providing liquidity injections, and using unconventional monetary policy
measures such as purchases of government and corporate bonds.

101 Ibid., p. 9.
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Figure 7. IMF Forecast, Gross Domestic Product
Percentage change

Source: World Economic Outlook, Update, International Monetary Fund, July, 2021. Created by CRS.
As a result of the various challenges, the IMF qualified its forecast by arguing that
A partial recovery is projected for 2021, with above trend growth rates, but the level of
GDP will remain below the pre-virus trend, with considerable uncertainty about the
strength of the rebound. Much worse growth outcomes are possible and maybe even likely.
This would follow if the pandemic and containment measures last longer, emerging and
developing economies are even more severely hit, tight financial conditions persist, or if
widespread scarring effects emerge due to firm closures and extended unemployment.102
The World Bank Forecast
In January 2021, the World Bank released its updated economic forecast, which indicated that
global economic growth would reach 4.3% in 2020 and 4.0% in 2021, compared with June 2020
projections of -5.2% for 2020 and 4.2% in 2021, but rise by a slower rate of 3.8% in 2022.103 The
assessment also concluded that absent “substantial and effective reforms,” the global economy
would experience a decade of “disappointing growth.” The Bank concluded that the forecast was
tilted toward downside risks. In particular, the Bank assessed that all regions of the world remain
vulnerable to renewed outbreaks of the virus, that there were logistical impediments to the
distribution of effective vaccines, that there are financial stresses in addition to elevated debt
levels and there is the possibility that the pandemic could have a more negative effect on incomes
and growth.104
An earlier forecast published on June 8, 2020 indicated the economic recession in 2020 would be
the deepest since World War II. It also estimated that the global economic recession would affect
90% of the world’s economies, a percentage that is greater than what was experienced during the
Great Depression.105 Similar to the OECD and the IMF forecasts, the World Bank argued that the

102 World Economic Outlook, p. v.
103 Global Economic Prospects, World Bank Group, January 2021, p. xvii.
104 Ibid., p. xviii.
105 Global Economic Prospects, World Bank Group, June 8, 2020, p. 15.
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economic impact of the global recession would fall most heavily on developing and emerging
economies that rely on global trade, tourism, or remittances from abroad, and those that depend
on commodity exports. In addition, the World Bank forecasted that most emerging and
developing economies could experience rates of growth in 2020 that could be the lowest overall
since the 1960s, with 90% of such economies expected to experience contractions in per capita
incomes and many millions of people falling back into poverty.
The World Bank also estimated that economic growth in advanced economies could decline by
5.4% in 2020 and recover to 3.3% in 2021, compared with the June forecast of 7.0% and 3.8%,
respectively. The United States, the Euro area and Japan were all estimated to experience a slower
rate of growth in 2020 and rise at a smaller rate in 2021 than the IMF forecast.
The global economic recession was projected to affect all regions in a type of synchronous
downturn, with some regions faring worse than others. Differences in the magnitude of regional
growth rates were attributed to the “scale of the domestic outbreak, vulnerability of the economy
to spillovers from global economic and financial stress the severity of preexisting challenges such
as widespread poverty, and the degree to which debt levels constrain the fiscal response.”106
According to the Bank’s baseline scenario, the projected economic recovery was expected to be
slow, reflecting shifts in consumption and work patterns as consumers attempted to rebuild
savings and businesses strengthen balance sheets. The World Bank also issued both a downside
and an upside scenario in which government lockdown policies were required to remain in effect
for a longer or a shorter period of time, respectively. The downside scenario projects a contraction
in global economic growth of 8% in 2020, as lockdown procedures are assumed to last an
additional three months, followed by a sluggish recovery. In contrast, the upside scenario projects
a decline in economic activity in 2020 of 4%, based on the assumption that economic activity
rebounds quickly in the third quarter of 2020.107
The Bank also concluded that global value chains (GVCs) had been important conduits through
which macroeconomic developments associated with the pandemic had been transmitted across
national borders. The economic effects of the pandemic were spread through trade linkages but
also amplified through quarantines, production shutdowns and border closures.108 Estimates by
the World Bank indicated that national policies adopted to blunt the spread of the virus affected
the global economy through four shocks: a decline in employment due to factory closures and
social distancing, a trade shock as a result of an increase in the cost of traded goods, a tourism
shock through a sharp contraction in international tourism, and a services shock. The magnitude
of the shocks varies by country depended on various factors, including the composition of output,
reliance on trade, and the level of GVC integration.
Global Trade
According to an October 4, 2021, forecast update, the World Trade Organization (WTO)
estimated that global trade volumes fell by 5.3% in 2020, nearly half as much as the drop of 9.2%
the WTO had forecasted in October 2020.109 The WTO data indicated that in the first half of
2021, global merchandise export and import volumes were up 13% compared with the same

106 Global Economic Prospects June 8, 2020, p. 115.
107 Ibid., p. 33.
108 Ibid., p. 118.
109 Global Trade Rebound Beast Expectations But Marked by Regional Divergences, World Trade Organization,
October 4, 2021.
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period in 2021. Similarly, trade volumes were up 20% over the same period in the previous year
and up 5.7% quarter over quarter, as indicated in Figure 8.
Trade gains were more pronounced for North America, Europe, and Asia, with other regions
lagging behind. The WTO concluded the trade recovery was broad-based with all major goods
categories experiencing year-over-year gains and reflected strong monetary and fiscal policy
actions taken by many governments. In particular, the WTO attributed the improved growth
performance to fiscal policies that supported personal incomes in advanced economies that, in
turn, supported relatively higher levels of consumption and global trade. The WTO indicated,
however, that supply shortages, particularly of semiconductor chips, could dampen the trade
recovery in subsequent quarters.110
The WTO’s comprehensive semi-annual forecast issued in March 2021 indicated the decline in
global trade in 2020 was not as severe as it had estimated in its previous forecast. The forecast
reflected a marked revision from its earlier forecast that global trade volumes could decline
between 13% and 32% in 2020 as a result of the economic impact of COVID-19. The updated
forecast also indicates the recovery in global trade in 2021 could be slightly faster than the WTO
had projected in October 2020, primarily reflecting expectations of a faster recovery in global
GDP in 2021 (5.1% compared with 4.9%).
In the first quarter of 2020, global exports and imports fell by 7.8% and 6.8%, respectively, in
volume terms and 10.6% and 8.6% in value terms, reflecting the global economic impact of the
pandemic, as indicated in Figure 8. In the second quarter, global exports and imports dropped by
11.6% and 11.1%, respectively, in volume and by 13.4% and 14.1%, in value terms. The WTO
estimated that some trade sectors were affected more than others, particularly trade in fuels and
mineral products fell by 38%, while trade in agricultural products fell by 5%. In the third quarter,
however, export and import volumes rebounded, increasing by 15.7% and 12.9%, respectively,
while export and import values increased by 20.7% and 18.3%, respectively. In the fourth quarter,
global exports and imports increased by 6.1% and 7.2%, respectively, in volume terms and by
9.7% and 9.6%, in value terms. Although the WTO has no comprehensive data on trade in
services, it concluded that the trend in trade in services likely matched that experienced in trade in
merchandise goods. The updated forecast also projected that global GDP had declined at an
annual rate of 3.8% in 2020, but could recover in 2021 at an annual growth rate of 5.1%. The
WTO indicated in its March forecast that renewed economic lockdowns in response to a
resurgence of COVID-19 cases in the fall of 2020 potentially shaved an additional 2% to 3%
percentage points off the annual global GDP growth rate in 2021 and negatively affected global
trade.
The WTO reported in its June 29, 2020 report on G-20 trade measures that during the mid-
October 2019 to mid-May 2020 period, countries had made “significant” progress in facilitating
imports, including products related to COVID-19.111 According to the report, various
governments initially responded to the pandemic by introducing new trade restrictive measures,
90% of which were export bans on medical products, such as surgical masks, gloves, medicine
and disinfectant. Since then, the WTO indicated that G20 economies have repealed 36% of the
restrictions and lowered barriers to imports of many pandemic-related products. As of mid-May
2020, the WTO reported that 65 of the 93 pandemic-related trade measures implemented during

110 Ibid., p. 1.
111 WTO Report on G20 Shows Moves to Facilitate Imports Even as Trade Restrictions Remain Widespread, World
Trade Organization, June 29, 2020. https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm.
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the monitoring period were of a trade-facilitating measures, rather than trade-restricting
measures.112
Figure 8. WTO Estimates of Quarterly Global Exports and Imports, Volumes and
Values

Source: World Trade Organization, October, 2021. Created by CRS.
In its October 2021 forecast, the WTO estimated the impact on trade volumes was larger in 2020
than it had estimated in previous forecasts, but trade volumes were projected to recover stronger
in 2021, by growing at 10.8%. The WTO’s various forecasts indicate that all geographic regions
would experience a rise in trade volumes in 2021 and 2022 compared with 2020, while North
America and Europe could experience a positive percentage increase in trade volumes in 2021,
comparable to the decline in volumes in percentage terms experienced in 2020. The forecast also
projected that sectors with extensive value chains, such as automobile products and electronics,
could experience the steepest declines in 2020. Although services were not included in the WTO
forecast, this segment of the economy could experience the largest disruption as a consequence of
restrictions on travel and transport and the closure of retail and hospitality establishments. Such
services as information technology, however, were growing to satisfy the demands of employees
working from home.
Table 8. WTO Forecast: Merchandise Trade Volume and Real GDP 2020-2022
Annual percentage change
Forecast scenario
Forecast scenario
Forecast scenario
(October 2020)
(March 2021)
(October 2021)

2020
2021
2020
2021
2022
2020
2021
2022
Volume of world
-0.1%
0.1%
-0.1%
0.1%
0.0%
-5.8%
10.8%
4.7%
merchandise trade
Exports

North America
-14.7
10.7
-8.5
7.7
5.1
-8.6
8.1
6.9
South and Central America
-7.7
5.4
-4.5
3.2
2.7
-4.7
7.2
2.0
Europe
-11.7
8.2
-8.0
8.3
3.9
-7.9
9.7
5.6

112 Report on G20 Trade Measures (Mid-October 2019 to Mid-May 2020), World Trade Organization, June 29, 2020.
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Forecast scenario
Forecast scenario
Forecast scenario
(October 2020)
(March 2021)
(October 2021)

2020
2021
2020
2021
2022
2020
2021
2022
CIS

-3.9
4.4
1.9
-1.5
0.6
8.5
Africa

-8.1
8.1
3.0
-8.8
7.0
6.0
Middle East

-8.2
12.4
5.0
-11.6
5.0
9.6
Asia
-4.5
5.7
0.3
8.4
3.5
0.3
14.4
2.3
Imports

North America
-8.7
6.7
-6.1
11.4
4.9
-6.1
12.6
4.5
South and Central America
-13.5
6.5
6.5
-9.3
8.1
-9.9
19.9
2.1
Europe
-10.7
8.7
-7.8
8.4
3.7
-7.6
9.1
6.8
CIS

-4.7
5.7
2.7
-5.6
13.8
-0.8
Africa

-8.8
5.5
4.0
-11.1
11.3
4.1
Middle East

-11.3
7.2
4.5
-13.9
9.3
8.7
Asia
-4.4
6.2
-1.3
5.7
4.4
-1.2
10.7
2.9
World Real GDP at
-4.8
4.9
-3.8
5.1
3.8
-3.5
5.3
4.1
market exchange rates
North America
-4.4
3.9
-4.1
5.9
3.8
-4.0
5.6
3.7
South and Central America
-7.5
3.8
-7.8
3.8
3.0
-7.5
4.9
2.9
Europe
-7.3
5.2
-7.1
3.7
2.6
-6.4
4.3
4.0
CIS

-0.5
1.0
1.2
-2.7
3.9
3.4
Africa

-2.9
2.6
3.8
-2.8
3.5
4.1
Middle East

-6.0
2.4
3.5
-4.6
2.9
4.5
Asia
-2.4
5.9
-1.1
6.1
4.1
-0.9
6.1
4.7
Source: Global Rebound Beats Expectations But Marked by Regional Divergences, World Trade Organization,
October 4, 2021.
Notes: Data for 2021 and 2022 are projections; GDP projections are based on scenarios simulated with the
WTO Global Trade Model. In the April and October forecasts, the CIS countries, Africa, and the Middle East
were grouped together as “Other Regions.” CIS is the Commonwealth of Independent States: Azerbaijan,
Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan, and
Ukraine.
Supply Chains
The pandemic also raised questions about the costs and benefits of the global supply chains that
businesses have erected over the past three decades. Evidence indicates that growth in supply
chains had slowed prior to the pandemic, but there is little consensus on the long-term impact of
the crisis. According to a December 2020 report by DHL and the New York University Stern
Scholl of Business, global interconnectedness comprises four distinct types of transactions: trade,
capital, information, and people.113 This analysis concluded the pandemic affected cross-border
movements of people in response to travel restrictions and in trade through a sharp contraction in

113 Altman, Steven A. and Phillip Bastian, DHL Global Connectedness Index 2020, 2020
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the global economy. Capital flows also dropped during 2020 as a result of lower corporate
earnings, business travel restrictions, negative business prospects, and concerns over global
supply chains.114
In some cases, businesses reportedly were reassessing their exposure to the risks posed by
extensive supply chains that potentially are vulnerable to numerous points of disruption. Also,
some governments were assessing the risks supply chains pose to national supplies of items
considered to be important to national security as a result of firms locating or shifting production
offshore. For multinational businesses, changing suppliers and shifting production locations can
be especially costly for some firms and can introduce additional risks.115 In addition, businesses
may be reluctant to relocate from production locations, such as China, that serve not only as
production platforms, but also represent important markets for their output. For instance, the
Bureau of Economic Analysis (BEA) reports that 10% of the global sales of the majority-owned
foreign affiliates of U.S. parent companies is shipped back to the U.S. parent company. In
contrast, 60% of such sales take place in the foreign country where the affiliate is located and
another 30% is shipped to other foreign countries in close proximity. For China, about 6% of the
sales of the majority-owned foreign affiliates of U.S. parent companies is shipped to the U.S.
parent, while 82% is sold in China and another 12% is shipped to other foreign countries.116
Beyond the current challenges the pandemic poses to global supply chains, a recent report by
McKinsey Global Institute catalogued a number of risks to supply chains.117 The report estimates
that 16% to 26% of global goods exports, worth $2.9 trillion to $4.6 trillion, potentially could
move to new countries over the next five years “if companies restructure their supplier networks.”
The report concluded, however, the pandemic had not caused firms to reshape their global
production networks in dramatic ways, because the networks reflect, “economic logic, hundreds
of billions of dollars’ worth of investment, and long-standing supplier relationships.”118 In
addition, the report concluded that although firms can shift production locations, the
interconnected nature of these chains “limits the economic case for making large-scale changes in
their physical location.”119 Instead of shifting production locations, firms reportedly considered
various strategies to withstand the challenges of a global economy by increasing sources of raw
materials and critical materials, expanding and diversifying supplier bases, investing in suppliers
to upgrade their capabilities, and regionalizing supply chains, among a number of possible
actions.120
Amidst the decline in global trade, 15 countries, including Brunei, Colombia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. Australia, China, Japan, New
Zealand, and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP) on
November 15, 2020, to create potentially one of the largest free trade agreements.121 The

114 Ibid., p. 32.
115 Beattie, Alan, Will Coronavirus Pandemic Finally Kill Off Global Supply Chains?, Financial Times, May 28, 2020.
https://www.ft.com/content/4ee0817a-809f-11ea-b0fb-13524ae1056b.
116 Activities of U.S. Multinational Enterprises: U.S. Parent Companies and Their Foreign Affiliates, Preliminary 2017
Statistics, Bureau of Economic Analysis, August 23, 2019, Table II.E.2. https://www.bea.gov/news/2019/activities-us-
multinational-enterprises-2017.
117 Risk, Resilience, and Rebalancing in Global Value Chains, McKinsey Global Institute, August 2020, p. 1
118 Ibid., p. 2.
119 Ibid., In Brief.
120 Risk, Resilience, and Rebalancing in Global Value Chains, p. 16.
121 Shih, Gerry, and Simon Denyer, As Trump Era Ends, Massive New Asian Trade Deal Leaves U.S. on the Sidelines,
Washington Post, November 16, 2020. https://www.washingtonpost.com/world/asia_pacific/trade-china-trump-obama-
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agreement needs to be ratified by at least six ASEAN countries and three non-ASEAN countries.
This agreement followed by two years the conclusion of negotiations over the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that replaced the proposed
Trans-Pacific Partnership agreement after the United States pulled out of the negotiations. The
agreement includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand,
Peru, Singapore, and Vietnam. The UK reportedly applied to join the trade agreement and China
announced on September 17, 2021, that it had formally applied to join the agreement.122
Global Foreign Investment
Similar to the negative impact on global trade of policy measures that were adopted to control the
spread of COVID-19, the measures negatively affected global foreign investment flows. In
addition, national governments implemented new or expanded foreign investment policies related
to national security, while attempting to navigate between legitimate national security risks and
policies that some policymakers argue are fundamentally protectionist. During 2020, various
governments adopted measures at both the national and international level to address the health
and economic consequences of the COVID-19 pandemic, as indicated in Table 9.123 According to
the United Nations Conference on Trade and Development (UNCTAD), these measure include
incentives and subsidies to increase domestic production of vaccines and personal protective
equipment (PPE) and direct state intervention through nationalization or through directives to
increase output at facilities that currently produced PPE materials or to initiate production at other
facilities. EU members moved independently to amend existing legislation or adopt new rules to
expand their review of foreign investments for national security reasons, particularly rules related
to acquisitions of firms involved in the production of medical care and health. Also, Australia,
Canada, and Japan expanded the range of foreign investments they screen. In some cases, policy
changes included enhanced foreign investment screening of foreign investment for “public
interest” reasons that may remain after the pandemic crisis.124
Table 9. Foreign Investment Screening Legislation Adopted During COVID-19
Country
Investment Measure
Spain
Adopted a Royal Decree to suspend its liberalization regime regarding listed and
unlisted Spanish companies and require authorization to acquire 10% or more of stock
in certain sectors, including critical infrastructure, critical technologies, media and food
security.
European Union
The EU Commission issued a Guidance to Member States concerning efforts by non-EU
investors to attempt to acquire health care capacities or related industries through
foreign investment during the pandemic and recommended that EU members make ful
use of FDI screening regimes or establish such regimes where they are not ful y
developed.
Australia
Temporarily lowered the monetary screening threshold to zero for all foreign
investments, requiring prior approval for all foreign investments and extended the
timeframe for screening procedures from 30 days to six months.

asia/2020/11/16/f02f43e4-27b7-11eb-9c21-3cc501d0981f_story.html.
122 Qian, Colin, Twinnie Siu, Tom Daly, Gabriel Crossley, Daniel Leussink, Sakura Murakami, Ben Blanchard, Jeanny
Kao, and David Brunnstrom, China Applies to Join Pacific Trade Pact to Boost Economic Clout, Reuters, September
17, 2021. https://www.reuters.com/world/china/china-officially-applies-join-cptpp-trade-pact-2021-09-16/.
123 World Investment Report 2020, United Nations Conference on Trade and Development, 2020, p. 93.
124 Ibid., p. 96.
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Country
Investment Measure
Italy
Expanded the scope of its FDI screening regime, including acquisitions from within the
EU, by adding finance, credit and insurance to its list of strategic sectors.
India
Introduced a requirement for prior governmental approval for all investment originating
from countries that share land borders with India.
Canada
Announced “enhanced security” reviews of foreign investments in Canadian firms to
prevent foreign firms from taking advantage of low stock valuations during the pandemic
to acquire any Canadian firm, but particularly those related to public health or involved
in the supply of critical goods and services to Canadians to protect Canadian’s health
and safety.
France
Added biotechnology to its list of critical sectors requiring prior governmental approval
for foreign acquisitions and temporarily lowered the voting rights threshold for listed
companies for FDI screening from 25% to 10%.
Germany
Amended its Foreign Trade and Payments Ordinance to emphasize critical public health
sectors and require prior governmental approval for foreign acquisitions of 10% or
more of the stock of German companies involved in developing, manufacturing or
producing vaccines, medicines, protective medical equipment and other medical goods
for the treatment of highly infectious diseases. Also adopted measures to align German
reviews with EU rules.
Hungary
Adopted a foreign investment screening mechanism that requires approval for
investments in 21 industries, including health care, pharmaceuticals and medical device
manufacturing, and non-medical industries. An investment can be denied that violates or
threatens public security or order, particularly the security of supply of basic social
needs.
Japan
Amended its list of sectors considered critical to national security by adding the
production of vaccines, medicines and advanced medical equipment, including
ventilators.
Poland
Adopted a FDI screening regime for foreign acquisitions of 20 % or more in publicly
listed companies, companies control ing strategic infrastructure or developing critical IT
software, or companies active in 21 industries, including pharmaceuticals, manufacturing
of medical devices, food processing and utilities.
Source: World Investment Report 2020, United Nations Conference on Trade and Development, 2020, pp. 92-93.
The U.N. also reported that governments adopted new regulations across a spectrum of areas and
also supported joint international efforts to address public aspects of the pandemic, as indicated in
Table 10. State intervention spanned policy approaches from investment incentives to promote
the production of medicines and medical equipment, assistance to affected firms and industries,
measures to circumvent intellectual property rights restrictions, and international efforts to speed
up vaccine production and cross-border sharing.
The shift in approach toward the national security dimensions of foreign investment, especially
by developed economies, has tended to blur the distinction between foreign investment, trade, and
national security and reflects the evolving nature of the concept of national security relative to
foreign investment. Conceivably, changes in technology and the global economy have made it
more difficult to assess the economic costs and benefits of changes in foreign investment policies
taken on national security grounds.
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Table 10. Investment Policy Instruments Adopted at the National and International
Levels to Address the COVID-19 Pandemic
Investment policy areas
Policy measures
Policy actions at the national level
Investment facilitation
Alleviate administrative burdens and bureaucratic
obstacles for firms.

Use of online tools and e-platforms.
Investment retention and aftercare by investment
COVID-19-related information services.
promotion agencies (IPAs)

Administrative and operational support during the
crisis.

Move to online services.
Investment incentives
Financial or fiscal incentives to produce COVID-19-
related medical equipment.

Incentives for conversion of production lines.

Incentives for enhancement of contracted economic
activities.
State participation in crisis-affected industries
Acquisition of equity in companies, including
nationalization.
Local small and medium enterprises (SMEs) and supply
Financial or fiscal support for domestic suppliers (such
chains
as SMEs).
National security and public health
Application and potential reinforcement of FDI
screening in pandemic-relevant industries.
Other State intervention in the health industry
Mandatory production.

Export bans.

Import facilitation.
Intellectual property (IP)
General authorization of non-voluntary licensing, to
speed up research and development (R&D).

IP holder-specific non-voluntary licensing, to enable
imports of medication.
Policy actions at the international level
International support measures for investment
International pledges in support of cross-border
investment.
IIAs
Reform International Investment Agreements (IIAs) to
support public health policies and to minimize investor–
State dispute risks.
Intellectual property (IP)
General authorization of non-voluntary licensing, to
speed up research and development (R&D).
Source: World Investment Report 2020, United Nations Conference on Trade and Development, 2020, p. 89.
According to UNCTAD, global foreign direct investment inflows fell by 42% in 2020 compared
with the same period in 2019, with continued weakness expected in 2021, as indicated in Figure
9.125 Global inflow totals were driven in large part due to the decline in foreign investment

125 Investment Trends Monitor, United Nations Conference on Trade and Development, January, 2021. Investment
Policy Instruments Adopted at the National and International level to Address the COVID-19 Pandemic
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inflows to developed economies, which fell by 69%. Inflows to Europe fell to -$4 billion,
indicating an outflow, compared with inflows in 2019 of $344 billion. In contrast, inflows to
developing economies fell by 12% over the period, aided in large part by positive inflows to
China. Investment flows to developing Asia, at $476 billion, dropped by 4% compared with 2019
and accounted for about half the total $859 billion global direct investment inflows in 2020.
Figure 9. Annual Foreign Direct Investment Inflows by Major Country Groups
Inflows in billions of dollars

Source: United Nations Conference on Trade and Development. Created by CRS.
As indicated in Figure 10, all major geographic areas except Asia experienced a drop in foreign
direct investment inflows in 2020 compared with 2019.126 This drop in foreign investment was
apparent in the three major types of foreign investment: cross-border investments; greenfield
investment, or investment in new business activity; and international project finance. In the three
types of investment activity, global activity fell by 10%, 35%, and 2%, respectively in 2020
compared with 2019. Cross-border merger and acquisition (M&A) activity increased by 31% and
147%, respectively, in Asia and Transition economies, but declined by 11% in developed
economies and 67% in Latin America. International project finance, reportedly an important
source of infrastructure finance, fell globally by 2%, but rose by 7% in developed economies,
primarily in Europe, and by 17% in Asia.

126 Investment Trends Monitor, United Nations Conference on Trade and Development, January 24, 2021.
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Figure 10. Global Foreign Direct Investment Inflows
In billions of dollars and percentage change

Source: United Nations Conference on Trade and Development. Created by CRS.
For the United States, BEA reported that U.S. direct investment abroad (outflows) and foreign
direct investment in the United States (inflows) rose by 37% and fell by half, respectively, in the
first half of 2020 compared with the first half of 2019, as indicated in Figure 11.127 The drop in
inbound foreign direct investment values partly reflect the lower values for equity, mirroring the
declines in major equity markets in the first half of 2020. For 2020 as a whole, U.S. direct
investment outflows rose by 155%, while foreign direct investment inflows fell by 30% compared
with 2019. In the first quarter of 2021, U.S. direct investment abroad fell by 20% compared with
the previous quarter; foreign direct investment in the United States fell by 31%, reflecting the
continuing challenges facing the global economy that are affecting a sustained recovery. In the
second quarter, U.S. direct investment outflows increased by 81% over the previous quarter to
reach $139 billion, the largest outflows recorded preceding the pandemic, while foreign direct
investment in the United States rose increased by 35% to reach $95 billion.

127 U.S. International Transactions, Second Quarter 2021, Bureau of Economic Analysis, September 21, 2021.
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Figure 11. U.S. Direct Investment; Inflows and Outflows

Source: Bureau of Economic Analysis. Created by CRS.
Notes: In the balance of payments, direct investment outflows are represented as a negative value, indicating an
outflow and direct investment inflows are represented as positive values. For presentation purposes, the signs
for direct investment abroad, or outflows, have been reversed.
Major Economic Developments
Between late February 2020 and spring 2021, financial markets from the United States to Asia
and Europe were whipsawed as investors alternated between optimism and pessimism amid
concerns that COVID-19 would create a global economic and financial crisis with few metrics to
indicate how prolonged and extensive the economic effects could be.128 February 24, in particular,
stands as a red-letter date as financial market indexes from Asia, Europe, and the United States
dropped by large amounts. Investors searched for safe-haven investments, such as the benchmark
U.S. Treasury 10-year security, which experienced a historic drop in yield to below 1% on March
3, 2020.129 In response to concerns that the global economy was in a freefall, the Federal Reserve
lowered key interest rates on March 3, 2020, to shore up economic activity, while the Bank of
Japan engaged in asset purchases to provide short-term liquidity to Japanese banks; Japan’s
government indicated it would also assist workers with wage subsidies. The Bank of Canada also
lowered its key interest rate. The International Monetary Fund (IMF) announced that it was
making about $50 billion available through emergency financing facilities for low-income and
emerging market countries and through funds available in its Catastrophe Containment and Relief
Trust (CCRT).130 As assessments of risk by financial market participants lessened, pressure on the
dollar and on U.S. Treasury securities lessened as well.

128 Samson, Adam and Hudson Lockett, “Stocks Fall Again in Worst Week Since 2008 Crisis,” Financial Times,
February 28. https://www.ft.com/content/4b23a140-59d3-11ea-a528-dd0f971febbc.
129 The price and yield of a bond are inversely related; increased demand for Treasury securities raises their price,
which lowers their yield. Levisohn, Ben, “The 10-Year Treasury Yield Fell Below 1% for the First Time Ever. What
That Means,” Barrons, March 3, 2020. https://www.barrons.com/articles/the-10-year-treasury-yield-fell-below-1-for-
the-first-time-ever-what-that-means-51583267310.
130 Georgieva, Kristalina, “Potential Impact of the COVID-19 Epidemic: What We Know and What We Can Do,”
International Monetary Fund, March 4, 2020. https://blogs.imf.org/2020/03/04/potential-impact-of-the-COVID-19-
epidemic-what-we-know-and-what-we-can-do/.
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Financial Markets
Reflecting investors’ uncertainties, the DJIA lost about one-third of its value between February
14, 2020, and March 23, 2020, as indicated in Figure 12. Expectations that the U.S. Congress
would adopt a $2.0 trillion spending package moved the DJIA up by more than 11% on March 24,
2020. From March 23 to April 15, the DJIA moved higher by 18%, paring its initial losses by
half. Since then, the DJIA trended upward, but moved erratically at times as investors weighed
news about the human cost and economic impact of the pandemic and the prospects of various
medical treatments. Between March 23 and July 1, the DJIA regained 70% of the value lost
during the February to March decline. On Monday, November 9, 2020, the DJIA gained over 800
points, or nearly three percentage points, as markets responded positively to press reports that an
effective COVID-19 vaccine had been developed. On November 10, the DJIA rose above 29,400
for the first time since the index fell in February 2020. Between January 1, 2021, and February 4,
2021, the DJIA increased by about 3.0%, continuing a rise in the index of 17% since the end of
October 2020. Through April, 2021, the DJIA had gained more than 12% in value and was 16%
higher than the value on February 14, 2020. On July 23, 2021, the DJIA crossed the 35,000 mark,
nearly doubling the value of the index since March 23, 2020.
As indicated in Table 11, the DJIA lost the largest part of its market valuation in trading during
February and March when the index lost nearly one-fourth of its value as more trading sessions
ended with overall market values lower than higher. Since March, the index has posted more
trading sessions that closed with positive gains than losses. By October 23, 2020, the DJIA had
recovered most of the value lost in February and March. During the final week of October 2020,
the DJIA lost more than 1,800 points, the largest weekly loss since March 2020 as Germany,
France and other European countries reinstituted lockdowns in response to a resurgence of
COVID-19 cases. In the first three days of November, however, the Index regained three-fourths
of the value it lost the previous week.
Announcements of vaccines portending a resurgence of economic activity boosted market
sentiment in November and December with the DJIA rising by over a combined 3,700 points or
by nearly 14%. In January 2021, the DJIA dropped by about 1% with more trading days ending
with the index down than days with the index up from the previous day. During the first six
months of 2021, the DJIA gained 15% in market value. During June 2021, the DJIA had one more
day of the index closing down than up as the index lost one-quarter of a point overall, the first
such decline since January 2021. Through October 2021, however, more trading session closed
higher than lower, the Index gained 1.24%, and closed above 35,000 for the first time on July 23,
2021. In October, trading sessions closing lower outnumbered sessions closing higher 13 to 7,
with the index as a whole rising by 5.57% in value, the largest decline since March 2021.
Table 11. Dow Jones Industrial Average Market Changes by Month
Sessions up Sessions down
Open
Close
Change in index valuation

January 2020
13
8
28,638.97
28,256.03
-382.94
-1.34%
February
8
11
28,319.65
25,409.36
-2,910.29
-10.28%
March
10
12
25,590.51
21,917.16
-3,673.35
-14.35%
April
12
9
21,227.38
24,345.72
3,118.34
14.69%
May
10
10
24,120.78
25,383.11
1,262.33
5.23%
June
14
8
25,342.99
25,812.88
469.89
1.85%
July
13
9
25,879.38
26,428.32
548.94
2.12%
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Sessions up Sessions down
Open
Close
Change in index valuation

August
14
7
26,542.32
28,430.05
1,887.73
7.11%
September
12
9
28,439.61
27,781.70
-657.91
-2.31%
October
10
12
27,816.90
26,501.60
-1,315.30
-4.73%
November
12
8
26,691.28
29,638.64
2,947.36
11.04%
December
14
8
29,707.50
30,606.48
808.98
2.71%
January 2021
8
11
30,223.89
29,981.10
-242.79
-0.80%
February
15
5
30,054.73
30,932.37
877.64
2.92%
March
13
10
31,065.90
32,981.55
1,915.65
6.17%
April
12
8
33,054.58
33,874.85
820.27
2.48%
May
13
7
33,904.89
34,529.45
624.56
1.84%
June
10
11
34,584.19
34, 502.51
-81.68
-0.24%
July
13
7
34,507.32
34,935.47
428.15
1,24%
August
13
9
34,968.56
35,360.73
392.17
1.12%
September
8
13
35,387.55
33,843.92
-1,543.63
-4.36%
October
13
7
33,930.70
35,819.56
1,888.86
5.57%
Source: Financial Times; calculations by CRS.
Similar to the 2008-2009 global financial crisis, central banks implemented a series of monetary
operations to provide liquidity to their economies. These actions, however, initially were not
viewed entirely positively by all financial market participants who questioned the use of policy
tools by central banks that were similar to those employed during the 2008-2009 financial crisis,
despite the fact that the COVID-19 and the previous crises were fundamentally different in origin.
During the previous financial crisis, central banks intervened to restart credit and spending by
banks that had engaged in risky assets. In the 2020 environment, central banks attempted to
address financial market volatility and prevent large-scale corporate insolvencies that reflected
the underlying economic uncertainty caused by the pandemic.
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Figure 12. Dow Jones Industrial Average
February 14, 2020, through November 8, 2021

Source: Financial Times. Created by CRS.
The yield on U.S. Treasury securities dropped to historic levels on March 6, 2020, and March 9,
2020, as investors moved out of stocks and into Treasury securities and other sovereign bonds,
including UK and German bonds, due in part to concerns over the impact the pandemic would
have on economic growth and expectations the Federal Reserve and other central banks would
lower short-term interest rates.131 On March 5, the U.S. Congress passed an $8 billion spending
bill to provide assistance for health care, sick leave, small business loans, and international
assistance. At the same time, commodity prices dropped sharply as a result of reduced economic
activity and disagreements among oil producers over production cuts in crude oil and lower
global demand for commodities, including crude oil.
The drop in some commodity prices raised concerns about corporate profits and led some
investors to sell equities and buy sovereign bonds. In overnight trading in various sessions
between March 8, and March 24, U.S. stock market indexes moved sharply (both higher and
lower), triggering automatic circuit breakers designed to halt trading if the indexes rise or fall by
more than 5% when markets are closed and 7% when markets are open.132 By early April, the
global mining industry had reduced production by an estimated 20% in response to falling
demand and labor quarantines and as a strategy for raising prices.133
On March 11, as the WHO designated COVID-19 a pandemic, governments and central banks
adopted additional monetary and fiscal policies to address the growing economic impact. The
Bank of England lowered its key interest rate, reduced capital buffers for UK banks, and provided
a funding program for small and medium businesses. The UK Chancellor of the Exchequer
proposed a budget that appropriated £30 billion (about $35 billion) for fiscal stimulus spending,

131 Smith, Colby, Richard Henderson, Philip Georgiadis, and Hudson Lockett, “Stocks Tumble and Government Bonds
Hit Highs on Virus Fears,” Financial Times, March 6, 2020. https://www.ft.com/content/9f94d6f8-5f51-11ea-b0ab-
339c2307bcd4.
132 Georgiadis, Philip, Adam Samson, and Hudson Lockett, “Stocks Plummet as Oil Crash Shakes Financial Markets,”
Financial Times, March 9, 2020. https://www.ft.com/content/8273a32a-61e4-11ea-a6cd-df28cc3c6a68.
133 Hume, Neil, “Mine Closures Bolster Metals Prices as Demand Collapses,” Financial Times, April 7, 2020.
https://www.ft.com/content/06ef38c9-18d8-427e-8675-a567227397c0.
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including funds for sick pay for workers, guarantees for loans to small businesses, and cuts in
business taxes. The European Commission announced a €25 billion (about $28 billion)
investment fund to assist EU countries and the Federal Reserve announced that it would expand
its repo market purchases to provide larger and longer-term funding to provide added liquidity to
financial markets.
International Role of the Dollar
Similar to conditions during the 2008-2009 financial crisis, the dollar emerged as the preferred
currency by investors, reinforcing its role as the dominant global reserve currency. As indicated in
Figure 13, the dollar appreciated more than 3.0% during the period between March 3 and March
13, 2020, reflecting increased international demand for the dollar and dollar-denominated assets.
Since the highs reached on March 23, the exchange value of the dollar has dropped between 1%
and 2% per month in a slow decline through December 2020 as financial strains eased and
demand for the dollar in international financial markets lessened.
By the end of January 2021, the dollar had depreciated by more than 11% from the highest value
it reached in March 2020. The development of COVID-19 vaccines likely affected the value of
the dollar in various ways, including factors that tend to appreciate the dollar as a result of
renewed economic growth in the United States and opposing forces that tend to depreciate the
dollar if demand declines for the dollar as a safe-haven currency. As previously noted, common
central banks policies of keeping key interest rates low also affected movements in the foreign
exchange value of the dollar in 2021 by reducing arbitrage opportunities and curtailing volatility.
Despite periods of appreciation and depreciation of the dollar through 2020 and 2021, by the end
of April, 2021, the dollar was down 2% compared with the value on January 2, 2020. In part, the
resolution of the UK’s withdrawal from the EU has strengthened both the Euro and the pound,
which tended to depreciate the value of the dollar. The decline in the value of the dollar
reportedly pushed some countries to consider intervening to weaken their currencies.134 Between
June 10, 2021, and August 20, 2021, the dollar appreciated about 3.6%, nearly reaching the value
recorded on January 2, 2020. The strengthening in the value of the dollar is attributed to a number
of factors, including an anticipated change in Fed monetary policies.135

134 Szalay, Eva, Central Banks Take Rare Step of Flagging Currency Sales in Advance, Financial Times, February 3,
2021. https://www.ft.com/content/0383f3a4-41a0-464a-b831-fd1a09a6b1b0.
135 Stubbington, Tommy, Federal Reserve’s Tilt Towards Tighter Policy Unleashes Dollar Bulls, Financial Times, July
19, 2021.
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Figure 13. U.S. Dollar Trade-Weighted Broad Index, Goods and Services
January 2, 2020, through October 29, 2021

Source: St. Louis Federal Reserve Bank. Created by CRS.
The Bank for International Settlements (BIS) emphasized the role of the dollar as a dominant
global currency in its 2019 triennial survey of currency markets.136 According to the survey, the
dollar accounts for 88% of global foreign exchange market turnover and is key in funding an
array of financial transactions, including serving as an invoicing currency to facilitate
international trade, as indicated in Figure 14. It also accounts for about 60% of central bank
foreign exchange holdings, half of non-U.S. banks foreign currency deposits, and two-thirds of
non-U.S. corporate borrowings from banks and the corporate bond market.137 In comparison, the
United States accounts for about one-fourth of global GDP and about one-fifth of global trade
(exports plus imports).

136 Foreign Exchange Turnover in April 2019, Bank for International Settlements, September 16, 2019.
https://www.bis.org/statistics/rpfx19_fx.htm.
137 See CRS In Focus IF10112, Introduction to Financial Services: The International Foreign Exchange Market.
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Figure 14. International Role of the Dollar

Source: U.S. Dollar Funding: An International Perspective, CGFS Papers No. 65, Bank for International Settlements,
June 2020. Created by CRS.
Notes: (1) Data refer to 2019. (2) Data refer to 2019. (3) U.S. dol ar-denominated cross-border loans by banks
to counterparties in all countries; data refer to Q4 2019 (excluding interoffice claims but including interbank
claims on account of loans and deposits); loans comprise nonnegotiable debt instruments that are loaned by
creditors directly to a debtor or represented by evidence of a deposit. (4) US dol ar denominated international
debt securities by all issuers; data refer to Q4 2019; these securities are issued outside the local market of the
country where the borrower resides, and capture issues conventionally known as eurobonds and foreign bonds
and exclude negotiable loans; instruments such as bonds, medium-term notes and money market instruments are
included. (5) Data refer to 2019. (6) Data refer to Q4 2019. (7) As estimated in Gopinath (2015). (8) Data refer
to February 2020. Sources: Gopinath (2015); Federal Reserve; IMF; CPB World Trade Monitor; Bloomberg;
SWIFT; BIS Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives
Markets; BIS locational banking statistics (LBS).
As a result of the dominant role of the dollar as a global reserve currency, disruptions in the
smooth functioning of the global dollar market can have far-reaching repercussions on
international trade and financial transactions. A June 2020 report by BIS stressed the central role
of the dollar in the global economy by concluding that dollar funding activities are highly
complex, geographically dispersed, and interconnected in ways that provide benefits to the
stability of the global financial system. This also means, however, that strains in the system can
easily be transmitted across different financial markets and across regions.138
In addition, the dominant role of the dollar in international trade pricing and trade financing
means the dollar plays a key role in the global economic recovery and that it can amplify the
impact of economic disruptions, according to the IMF.139 Traditionally, most economic models
are based on the assumption that countries set their prices in their home currencies. As a result,
domestically produced goods and services become cheaper for trading partners when the
domestic currency weakens, leading to increased demand by trading partners and increased
exports. However, much international trade, including many commodities, is priced in dollars,
which means that trade volumes respond less than they would if goods were priced in exporters’
home currencies. Limited evidence indicates that a significant share of bilateral trade between

138 Bank for International Settlements, U.S, Dollar Funding: An International Perspective, CGFS Papers, No. 65, June
2020, p. 52. https://www.bis.org/publ/cgfs65.htm.
139 Dominant Currencies and External Adjustment, IMF Staff Discussion Note 20/05, International Monetary Fund,
July 2020.
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countries other than the United States is invoiced in U.S. dollars.140 As a result, an appreciation of
the dollar against other currencies, or a weakening in other currencies, has a muted effect on
export volumes by other countries, at least in the short run, as has been evident in movements in
exchange rates and trade volumes of emerging market and developing economies. The IMF also
concluded that because countries other than the United States price much of their trade in dollars,
an appreciation in the value of the dollar, or a depreciation in the value of other currencies
relative to the dollar, reduces both exports and imports. As a result, a depreciation in other
currencies relative to the dollar provides less of a boost in their exports and, therefore, less of a
countercyclical support.
Together, these effects translate into movements in the exchange value of the dollar that at times
contrast with traditional theory, since such movements do not affect trade volumes as much as
might be expected. For instance, after appreciating in March 2020, the trade-weighted value of
the dollar steadily depreciated through December 2020 and then has roller-coasted through 2021.
In standard models, the depreciation in the dollar would be expected to lower export prices and,
in turn, increase demand for U.S. exports, or increase the volume of exports, while import
volumes would be expected to decline along with the rising price of foreign currencies relative to
the dollar. GDP data through the second quarter of 2021 indicate, however, that U.S. trade prices
for exports and imports and trade volumes for exports and imports generally moved in tandem, as
indicated in Figure 15.
The international role of the dollar and the well-developed U.S. capital markets also provide the
United States with greater latitude in financing its trade deficit. For some trade specialists, the
widely accepted characterization of the current account as a product of a domestic saving-
investment relationship fails to distinguish between a country’s domestic saving-investment
balance, its ability to finance its trade deficit, and the role of cross-border capital flows. These
flows suggest that the ability of the United States to finance its trade imbalances through capital
inflows eases the constraint imposed by the domestic saving-investment balance.
The international role of the dollar also increases pressure on the Federal Reserve essentially to
assume the lead role as the global lender of last resort during crises. Reminiscent of the financial
crisis, the global economy experienced a period of dollar shortage, requiring the Federal Reserve
to take numerous steps to ensure the supply of dollars to the U.S. and global economies, including
activating existing currency swap arrangements, establishing such arrangements with additional
central banks, and creating new financial facilities to provide liquidity to central banks and
monetary authorities.141 Typically, banks lend long-term and borrow short-term and can only
borrow from their home central bank. In turn, central banks can only provide liquidity in their
own currency. Consequently, a bank can become illiquid in a panic, meaning it cannot borrow in
private markets to meet short-term cash flow needs. Swap lines are designed to allow foreign
central banks the funds necessary to provide needed liquidity to their country’s banks in dollars.

140 Ibid., p. 8.
141 Politi, James, Brendan Greeley, and Colby Smith, “Fed Sets Up Scheme to Meet Booming Foreign Demand for
Dollars,” Financial Times, March 31, 2020. https://www.ft.com/content/6c976586-a6ea-42ec-a369-9353186c05bb.
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Figure 15. Quarterly Price and Quantity Indexes, U.S. Goods Imports and Exports

Source: Bureau of Economic Analysis. Created by CRS.
Notes: 2012 = 100.
U.S. Monthly Trade
BEA data illustrate the sharp drop in U.S. trade volumes for both exports and imports of goods
and services in 2020 compared with 2019. Trade in services was especially hard hit as a result of
lockdowns that restricted tourism travel and lower transport revenues as a result of the overall
decline in economic activity. Trade in services fell sharply with the volume of services exports
and imports declining by multiples of the percentage decline in goods trade, as indicated in Table
12. Prices for services exports and imports, however, fell slightly compared with the decline in
prices of goods imports and exports. The largest changes in prices and quantities for goods and
services occurred in the second quarter of 2020 following the same pattern as the second quarter
change in GDP. The quantity of U.S. exports and imports fell by 23% and 16%, respectively, in
second quarter 2020, compared with the preceding quarter.142
In value terms, the prices of U.S. goods exports in second quarter 2020 fell by 6.0%, while the
price of imports fell by 3.5%, compared with the first quarter. In the third quarter, both export and
import volumes increased by about 20%, while export and import prices rose by 3.8% and 2.1%,
respectively. In fourth quarter 2020, U.S. export and import prices increased slightly, while export
and import volumes increased by 6.0% and 7.0%, respectively. As a result, the overall value of
exports and imports rose slightly less than 5% in the fourth quarter of 2020. According to U.S.
balance of payments data, the overall annual value of U.S, goods exports and imports (the
combined changes in prices and volumes) dropped by 35% and 16%, respectively year-over-year
(2020 compared to 2019).143
In the first quarter of 2021, U.S. goods export volumes fell slightly, while import volumes rose by
2.6%. Export and import price indexes both rose, reflecting an increase of 30% in petroleum
export prices and a rise in petroleum import prices of 38%. Compared to the decline in goods
export and import volumes in the second quarter of 2020, first quarter 2021 export and import
volumes were up 28% and 31%, respectively, reflecting an increase in the global rate of economic
growth. Relative to first quarter 2021, price indexes for exports and imports in the second quarter

142 Gross Domestic Product, Second Quarter, 2021 (Advance Estimate) and Annual Update, Bureau of Economic
Analysis, July 29, 2021.
143 U.S. International Trade in Goods and Services June 2021, Bureau of Economic Analysis, August 5, 2021.
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of 2021 rose by 5.8% and 3.4%, respectively. In contrast, goods export and import volumes
increased by 1.4% and 1.6$, respectively. The combined price and quantity affects indicate that
goods exports grew by 6.8% in the second quarter of 2021 compared with first quarter 2021,
while goods imports increased by 4.2%.
In the first half of 2020, trade in services experienced a sharp drop in quantity and price terms as
travel exports fell by 61% and travel imports dropped by 90%. Overall, exports of services
declined by 10.3% and 15.3% in the first and second quarters of 2020, but demonstrated mixed
changes in the subsequent four quarters. Similarly, total import services fell by 9.7% and 24.6%
in the first two quarters of 2020, but experienced positive changes in volumes since. Travel-
related imports, in particular, rose by 97.9% in fourth quarter 2020 compared with the preceding
quarter. The quarterly prices of both services exports and imports increased over each of the
subsequent four quarters. U.S. imports of services in the second quarter, however, grew twice as
fast as exports of services; the overall goods and services deficit in the second quarter increased
by 1.4% over the first quarter.144
Table 12. U.S. Goods and Services Exports and Imports, Change in Quarterly Price
and Quantity Indexes
Percentage change
Year over Year
% Change
Quarter over Quarter % Change
2020
2021

2019
2020
1q
2q
3q
4q
1q
2q
Goods

Exports

Quantity
-0.1%
-10.2%
-1.2%
-23.1%
18.8%
5.9%
-0.4%
1.4%
Price
-1.6
-4.0
-1.1
-6.0
3.8
1.7
6.1
5.8
Imports

Quantity
0.5
-5.6
-1.9
-15.6
19.5
6.8
2.6
1.4
Price
-2.1
-2.8
-0.5
-3.5
2.1
0.4
3.5
3.4
Services

Exports

Quantity
-0.1
-19.7
-10.3
-15.3
-1.3
3.8
-1.5
1.6
Price
1.7
0.4
0.4
-2.1
2.1
1.2
2.2
1.7
Imports

Quantity
3.9
-22.6
-9.7
-24.6
6.7
8.3
0.5
4.6
Price
0.9
0.5
0.7
-1.0
1.1
1.2
1.1
2.1
Source: Bureau of Economic Analysis. Quarterly GDP estimates, export and imports price and quantity indices.
Created by CRS.
Notes: Annual changes represent percentage change in 4th quarter index values over the 4th quarter of the
preceding year; quarterly changes represent the change in quarterly index values over the previous quarter.

144 Ibid.
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On October 5, 2021, the U.S. Census Bureau reported an increase in the overall U.S. goods and
services trade deficit in August 2021 of about $3 billion to reach a monthly total of $73.3 billion
(the largest monthly goods and services trade deficit on record), compared to the July total of
$70.3 billion. The increase in the August goods and services deficit primarily reflected a 1.8%
increase in the goods trade deficit and a 7.7% decrease in the services trade surplus, compared to
July data, as indicated in Figure 16.145 The August exports of goods were the highest on record,
while the imports of goods and services was also the highest on record. According to BEA data,
goods exports increased from $148.6 billion in July 2021 to $149.7 billion in August 2021; goods
imports rose from $236.4 billion to $239.1 billion. Relative to services, U.S. services exports fell
from $64.1 billion in July to $64.0 billion in August, while imports of services increased from
$46.6 billion to $47.9 billion. On a year-over-basis, the overall goods and services trade deficit in
2020 increased by $105 billion, or 18.2%, compared with 2019 and demonstrates the impact that
business lockdowns had on U.S. and global trade in the first quarter of 2020. Relative to 2019,
U.S. goods exports in 2020 fell by 13.2%, while goods imports fell by 6.6%, accounting for the
largest part of the increase in the annual U.S. trade balance. Services exports declined by 21% in
2020 relative to 2019, while services imports fell by 22%, reflecting the drop overall in services
activities as a result of quarantines and business lockdowns.
Figure 16. Monthly U.S. Exports and Imports of Goods and Services 2020-2021

Source: Census Bureau, Bureau of Economic Analysis. Created by CRS.
Global Energy Markets
The price of oil has served as an additional indicator of the impact of the pandemic on the global
economy. As global economic activity fell in March and April 2020, demand for oil also fell,
resulting in rising inventories and falling prices. In response, oil producers reduced oil
production, only slowly restoring output as the global economic activity recovered. As financial
market indexes declined in 2020 and the dollar appreciated, the price of Brent crude oil dropped
close to $20 per barrel on March 20, as indicated in Figure 17.
As a result of the steep drop in oil prices, oil producers agreed in April, 2020 to reduce global
supply by 10%, or 9.6 million barrels per day. Since the low prices recorded in April, the price of
Brent crude oil generally moved within a range of $40 to $44 per barrel through late November
2020, when it began edging above $50 per barrel. In trading December 10, 2020, the price of
Brent crude oil breached the $50 per barrel mark for the first time since March 2020. As energy

145 Monthly U.S. International Trade in Goods and Services, August 2021, Census Bureau, October 5, 2021.
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demand showed signs of recovering in 2021, the cuts in oil production that began in April were
trimmed to 7.7 million barrels per day and were trimmed by an additional 2 million barrels per
day starting in January 2021.
On February 23, 2021, the price of Brent crude oil rose above $67 per barrel, the highest price
since January 9, 2020, but dropped to $64 per barrel by March 3, 2021. On March 5, 2021, the
Brent crude price of a barrel of oil rose to $69 per barrel, the highest since January 2020, as
OPEC and Russia decided against increasing petroleum output.146 By the end of June 2021 the
price of Brent crude oil pushed above $75 per barrel. In meetings in early July 2021, OPEC
members agreed to increase production as the international price of crude oil reached nearly $78
per barrel, but objections by the United Arab Emirates (UAE) over the calculation used to
increase production targets held up the agreement.147 On July18, 2021, OPEC and Russia agreed
to increase crude oil production by an additional 400,000 barrels a day into 2022.148 On August
11, 2021, the Biden Administration, citing concerns over the negative impact rising energy prices
could have on an economic recovery, called on OPEC to increase oil production beyond levels
previously announced.149 According to the Bureau of Labor Statistics, U.S. energy prices in June
had increased by 35% over the previous year.150
Figure 17. Brent Crude Oil Price Per Barrel in Dollars
January 9, 2020, through November 9, 2021

Source: Markets Insider. Created by CRS.

146 Raval, Anjli, Oil Jumps as OPEC and Allies Decide Against Big Rise in Output, Financial Times, March 5, 2021.
https://www.ft.com/content/771ebf3a-cff0-4ff3-ab9a-0bbd01a33f55.
147 Sheppard, David, Why is OPEC+ in Turmoil When Oil Prices Are Elevated?, Financial Times, July 5, 2021.
148 Rovnick, Naomi, Tommy Stubbington, Hudson Lockett, and Joe Rennison, Global Markets Shaken by Fears Over
Delta Variant, Financial Times, July 19, 2021. https://www.ft.com/content/5b2248be-8f0e-4235-ba2e-2187c96f16a6.
149 Fedor, Lauren and Derek Brower, White House Calls on OPEC to Boost Production to Contain Fuel Prices,
Financial Times, August 11, 2021. https://www.ft.com/content/a8a631cf-de43-47e8-8cc4-99732c39c4da.
150 Producer Price Indexes-June 2021, Bureau of Labor Statistics, July 14, 2021.
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Country Policy Responses
As previously indicated, after a delayed response, most central banks followed the actions of
Federal Reserve. In addition, national governments adopted various fiscal measures to sustain
economic activity. In response to growing concerns over the global economic impact of the
pandemic, G-7 finance ministers and central bankers released a statement on March 3, 2020,
indicating they would “use all appropriate policy tools” to sustain economic growth.151 The
Finance Ministers also pledged fiscal support to ensure health systems can sustain efforts to fight
the outbreak.152 In most cases, however, countries pursued their own divergent strategies, in some
cases including banning exports of medical equipment. Following the G-7 statement, the U.S.
Federal Reserve (Fed) lowered its federal funds rate by 50 basis points, or 0.5%, to a range of
1.0% to 1.25% due to concerns about the “evolving risks to economic activity of the COVID-
19.”153 At the time, the cut was the largest one-time reduction in the interest rate by the Fed since
the 2008-2009 global financial crisis.
On April 15, 2021, the Director-General of the WTO called on WTO members and vaccine
manufacturers to increase production, reduce export restrictions, and suspend intellectual property
rights on COVID-19 vaccines to increase immunizations.154 The WHO also reported that new
COVID-19 cases had nearly doubled around the world over the preceding two months,
approaching the highest rates of infection since the start of the pandemic. Reportedly, new case
numbers had spiked in every region of the world, with the largest outbreaks occurring in India,
Brazil, Poland, Turkey and some other countries.155 Also on April 15, 2021, a group of 175 former
world leaders and Nobel laureates called on the United States to suspend intellectual property
rights for COVID-19 vaccines to facilitate the international production and distribution of
vaccines by allowing developing countries the ability to manufacture their own vaccines. The
group warned that, “… inequitable vaccine access would impact the global economy and prevent
it from recovering.”156
On April 16, the WHO announced that it would develop one or more COVID-19 technology hubs
to transfer a “comprehensive technology package and provide appropriate technology to
interested manufacturers” in developing economies.157 Reportedly, the initiative’s goal is to make
the technology either free of intellectual property constraints in developing economies, or that
such rights are made available through nonexclusive licenses.

151 Statement of G-7 Finance Ministers and Central Bank Governors, March 3, 2020. https://home.treasury.gov/news/
press-releases/sm927. Long, Heather, “G-7 Leaders Promise to Help Economy as COVID-19 Spreads, But They Don’t
Announce Any New Action,” Washington Post, March 3, 2020. https://www.washingtonpost.com/business/2020/03/
03/economy-COVID-19-rate-cuts/.
152 Giles et al., “Finance Ministers Ready to Take Action.”
153 Federal Reserve Releases FOMC Statement, March 3, 2020, https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200303a.htm.
154 Cunnigham, Erin, New African WTO Head Urges Members to Take Action on Vaccine Inequity, The Washington
Post, April 15, 2021.
155 Cunningham, Erin and Siobhan O’Grady, New Global Coronavirus Cases Nearly Double in Two Months, The
Washington Post, April 16, 2021. https://www.washingtonpost.com/world/2021/04/16/global-coronavirus-cases-surge-
who/.
156 Williams, Aime, Former World Leaders Call on Biden to Suspend Covid-19 Vaccine Patents, Financial Times,
April 15, 2021. https://www.ft.com/content/43fd53f5-2b82-4e41-981c-8544a6ce996b.
157 World Health Organization, Establishment of a COVID-19 mRNA Vaccine Technology Transfer Hub to Scale Up
Global Manufacturing, April 16, 2021.
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China, which experienced positive quarterly rates of economic growth throughout the pandemic-
related recession, reportedly considered a series of actions to support its economic growth rate
due to concerns over a slowing economy. On July 7, 2021, the Chinese Cabinet stated it would
scale back pandemic-related spending to address concerns over accumulated government debt
and potentially to maintain low borrowing costs for small businesses. The statement also
indicated the cabinet supported cuts by the People’s Bank of China (PBOC) in its required
reserve ratio (RRR)—generally considered to be among the strongest actions central banks can
take—to support the economy.158
According to the WHO, sixteen African countries experienced their worst period during the
pandemic in early July 2021, as a result of rising rates of infections and deaths, with even larger
numbers expected.159 Some of the most severely affected countries were Namibia, Uganda,
Zambia, and South Africa, The WHO indicated the continent was experiencing a third wave of
infections as a result of the rapidly spreading Delta variant. Reportedly, less than one percent of
the continent’s population has been vaccinated.
In the early stages of the pandemic, foreign investors pulled an estimated $26 billion out of
developing Asian economies not including more than $16 billion out of India, increasing concerns
about a major economic recession in Asia. Some estimates indicate that 29 million people in Latin
America could fall into poverty, reversing a decade of efforts to narrow income inequality. Some
analysts also expressed concern that Africa, after escaping the initial spread of infections, could
face a sharp increase in rates of infection outside South Africa, Egypt, Nigeria, Algeria, and
Ghana, where most of the initial infections had occurred.160
In October 2020, the Bank of Canada indicated that Canada’s quarterly rate of growth declined by
13.0% in the second quarter of 2020, but by 4.4% in the third quarter as business and other
restrictions were relaxed and by a rebound in home sales. The Bank also estimated that growth
for 2020 declined at an annual rate of 5.3% in 2020, but could increase by an estimated 6.0% in
2021 and 4.6%in 2022.161 On December 1, the Canadian government adopted a C$1 trillion
spending package to support economic growth, reportedly the largest such fiscal stimulus
package adopted in the post-World War II period.162 The package provided relief to provinces and
territories to improve infection in long-term care facilities, industries hard hit by the pandemic,
such as tourism, travel and arts, and provide loans to eligible businesses and to lower and middle
income families.
India announced on March 25, 2021, that it was temporarily halting exports of COVID-19
vaccines and prioritizing local vaccinations in response to a resurgence in viral cases.163 In early
April 2021, India and Brazil were designated global viral infection hot spots due to a resurgence

158 Qian, Colin, Judy Hua, Kevin Yao, Giles Elgood and Mark Heinrich, China’s Cabinet Says It Will Use RRR Cuts to
Support Real Economy, Reuters, July 7, 2021.
159 Cunningham, Erin, Africa Suffers ‘Worst Pandemic Week Ever’ as Cases Surge, Vaccinations Lag, The Washington
Post, July 9, 2021.
160 Pilling, David, The Pandemic is Getting Worse: Africa Prepares for Surge in Infections, Financial Times, July 20,
2020. https://www.ft.com/content/1b3274ce-de3b-411d-8544-a024e64c3542.
161 Monetary Policy Report July 2021, Bank of Canada, July 2021.
162 Canada Unveils Largest Economic Relief Package Since WW2, BBC News, December 1, 2020.
https://www.bbc.com/news/world-us-canada-55139229.
163 Findlay, Stephanie, Michael Peel, Donato Paolo Mancini, Andres Schipani and Jasmine Cameron-Chileshe, India
Blocks Vaccine Exports in Blow to Dozens of Nations Financial Times, March 25, 2021. https://www.ft.com/content/
5349389c-8313-41e0-9a67-58274e24a019.
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in cases. On May 6, India reported a single-day total of 412,000 new cases.164 By July 2, India’s
death toll from the pandemic surpassed 400,000.165 Brazil reportedly has had over 350,000 viral-
related deaths: in some cities in Brazil, COVID-related daily deaths have outnumbered daily
births.166
In April 2021, India reported that in the second quarter its GDP growth rate fell by 25.8%
compared with the first quarter, raising concerns that the country could experience its most severe
economic contraction on record.167 Subsequent forecasts indicate that India’s economy grew by
23.7% in the third quarter of 2020, reportedly reflecting higher levels of consumer activity, and
by 7.9% in the fourth quarter.168 On an annual basis, India’s economy reportedly grew at a rate
of -3.5%. On November 12, India’s finance minister announced a new package of fiscal measures
totaling $35 billion to increase consumer spending and to assist manufacturing, agriculture, and
exports. The move followed an announcement by India’s cabinet that it had approved a spending
package of $27 billion to provide incentives over five years to manufacturing firms, including
automobiles, auto parts, pharmaceuticals, textiles, and food products.169
As a consequence of the resurgence in cases and renewed lockdowns in economies, the IMF
argued that advanced economies needed to sustain fiscal support for consumers and businesses as
the most effective means of stimulating their economies. The IMF argued this support was
necessary because the global economy was experiencing what economists term a Keynesian
liquidity trap, named after economist John Maynard Keynes. In theoretical terms, a liquidity trap
exists when central banks’ key interest rates are so low they have little impact through traditional
means to affect business and consumer activity. According to the IMF, in 60% of the global
economy, central banks had pushed key interest rates below 1% and in one-fifth of the global
economy, interest rates were below zero. In these circumstances, economists generally argue that
adjusting fiscal policy, or government taxing and spending, is the more effective policy tool for
raising the rate of economic growth.170 The IMF concluded that, “Fiscal policy must play a
leading role in the recovery.”
The United States
Recognizing the growing impact the pandemic was having on financial markets and economic
growth, the Federal Reserve (Fed) took a number of steps to promote economic and financial

164 Slater, Joanna, India Announces Record Number of Deaths and New Cases as Outbreak Rages on, The Washington
Post, May 6, 2021; Parker, Claire, Paul Schemm, Sean Sullivan, India Sets Another Daily Coronavirus Case Record:
U.S. Pledges Help, The Washington Post, April 26, 2021. https://www.washingtonpost.com/world/asia_pacific/india-
coronavirus-deaths-pandemic/2021/04/25/ec0f208a-a51c-11eb-b314-2e993bd83e31_story.html.
165 Cunningham, Erin, Covid-19 Global Updates: India’s Death Toll Tops 400,000 as Delta Variant Gains Ground
Worldwide, The Washington Post, July 2, 2021.
166 Caverni, Alexandre, Brazil Sees 1,803 COVID-19 Deaths; Chinese Vaccine Found 50.7% Effective Against
Variant, Reuters, April 11, 2021; Hassan, Jennifer, In Many Brazilian Cities, Deaths Have Overtaken Births, The
Washington Post, April 15, 2021.
167 Slater, Joanna, India’s Economy Contracts by Nearly 24%, Its Sharpest Drop On Record, Washington Post, August
31, 2020. https://www.washingtonpost.com/world/asia_pacific/indias-economy-contracts-by-nearly-24-percent-amid-
pandemic/2020/08/31/92318fbe-eb70-11ea-bd08-1b10132b458f_story.html?hpid=hp_world-right-4-0_world-latest-
feed%3Ahomepage%2Fstory-ans.
168 RBI Bulletin—November 2020, Reserve Bank of India, November 2020.
169 Sharma, Ashok, India Announces $35 Billion Economic Stimulus Package, ABCNews, November 12, 2020.
https://abcnews.go.com/International/wireStory/india-announces-35-billion-economic-stimulus-package-74165709.
170 Gopinath, Gita, Global Liquidity Trap Requires a Big Fiscal Response, Financial Times, November 3, 2020,
https://www.ft.com/content/2e1c0555-d65b-48d1-9af3-825d187eec58.
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stability involving the Fed’s monetary policy and “lender of last resort” roles. Some of these
actions were intended to stimulate economic activity by reducing interest rates; other actions were
intended to provide liquidity to financial markets so firms would have access to needed funding.
In announcing its decisions, the Fed indicated that “[t]he COVID-19 outbreak has harmed
communities and disrupted economic activity in many countries, including the United States.
Global financial conditions have also been significantly affected.171” On March 31, 2020, the
Trump Administration announced that it was suspending for 90 days tariffs it had placed on
imports of apparel and light trucks from China, but not on other consumer goods and metals.172 In
October, Congress and the Trump Administration negotiated over the substance of an additional
spending package to support the U.S. economy. The U.S. Congress passed a $1.9 trillion
economic stimulus bill, designated the American Rescue Plan Act (P.L. 117-2), that was signed by
President Biden on March 11, 2021.
On May 5, 2021, the Biden administration announced it would support international discussions
to waive intellectual property restrictions on COVID-19 vaccine production for developing
economies.173 Prior to this announcement, developed economies, including Britain, Switzerland,
the EU, and the United States, had blocked a proposal by over 80 developing countries at the
World Trade Organization to suspend intellectual property rights restrictions on production of
COVID-19 vaccines.174 The EU announced on June 4, 2021, that it would reject the U.S. proposal
to drop IP protections and offered a three-point plan of its own that included (1) maintaining
export restrictions; (2) encouraging vaccine manufacturers to negotiate agreements with
producers in developing economies and increasing vaccine supplies to vulnerable countries; and
(3) using existing WTO rules to grant licenses to producers without the consent of the patent-
holder.175 During the G-7 summit in England on June 11, 2021, the United States and the other G-
7 leaders announced they would provide a combined total of 1 billion doses of the COVID-19
vaccine in addition to lifesaving medical supplies, oxygen, diagnostics, therapeutics, and personal
protective equipment (PPE) to low and middle income developing countries.176
On October 28, 2021, the Bureau of Economic Analysis (BEA) released estimated third quarter
data on U.S. GDP, which indicated the U.S. economy grew at an annual rate of 2.0% growth and
that the economy grew by annualized rates of 6.3% in the first quarter and 6.7% in the second
quarter of 2021, outpacing the 4th quarter 2020 rate of 4.5%. The deceleration in the rate of
growth in the third quarter reflected lower levels of personal consumption expenditures on motor
vehicles and parts and on food, services, and accommodation. In contrast, U.S. GDP fell at an
annual rate of 31.4% in the second quarter of 2020, after falling by 5.0% at an annual rate in the
first quarter, as indicated in Figure 18.177 On an annual basis, the 2020 rate of growth fell by
3.4%, compared with a 2019 rate of 2.3%. In the second quarter of 2020, amidst a large decline

171 Federal Reserve Issues FOMC Statement, March 15, 2020. https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200315a.htm.
172 Politi, James and Aime Williams, “Trump to Suspend Some Tariffs for 90 Days,” Financial Times, March 31, 2020.
https://www.ft.com/content/46add447-2048-4348-bd34-2088ad0e3bc8.
173 Diamond, Dan, Tyler Pager, and Jeff Stein, Biden Commits to Waiving Vaccine Patents, Driving Wedge With
Pharmaceutical Companies, The Washington Post, May 5, 2021.
174 Rich, Developing Economies Wrangle Over COVID Patents, Reuters, March 10, 2021. https://www.reuters.com/
article/us-health-coronavirus-wto/rich-developing-nations-wrangle-over-covid-vaccine-patents-idUSKBN2B21V9.
175 Blenkinsop, Phillip, Resisting Patent Waiver, EU Submits Vaccine Plan to WTO, Reuters, June 4, 2021.
https://www.reuters.com/world/europe/eu-executive-submits-vaccine-access-proposal-wto-2021-06-04/.
176 Scott, Eugene, G-7 Leaders Commit to Making 1 Billion Coronavirus Vaccines Available Starting This Summer,
The Washington Post, June 11, 2021.
177 Gross Domestic Product, Third Quarter 2021, (Advance Estimate), Bureau of Economic Analysis, October 28,
2021.
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overall in U.S. economic activity in response to business lockdowns, some sectors experienced a
decline in activity of 80% or more, including recreation, food services and accommodation and
transportation sectors. In the third quarter, however, all sectors except mining experienced
positive rate of growth. Personal consumption increased by 41% in the third quarter, after falling
by 31.4% in the second quarter, sustaining economic growth.
Figure 18. U.S. GDP Percentage Change From Preceding Quarter
Seasonally adjusted at annual rates

Source: Bureau of Economic Analysis. Created by CRS.
Notes: Exports and imports represent the combination of goods and services.
On October 8, 2021, the BLS released data on the employment situation in September, which
indicated that nonfarm payrolls rose by 194,000, down from 366,000 jobs gained in August and
represents the lowest number of job gains since January 2021; the rate of unemployment was
4.8%.178 The data also indicated that 5.0 million persons reported in September they did not work

178 The Employment Situation-September 2021, Bureau of Labor Statistics, October 8, 2021. https://www.bls.gov/. The
unemployment number does not include 4.5 million workers who were working part time not by choice and 6.0 million
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