Financial turmoil

In 2020, the economies of all countries, except China, contracted. The world went into a deep recession. The World Bank predicts a contraction of global GDP in 2020 by about 5.2 percent. The economies of developed countries will contract by 7 per cent and developing countries by 2.5 per cent, their worst performances in the last 60 years.

Almost every industry, in every country, lost sales, profits and market capitalisation.  Airlines and hotels, suffered the most. The year also saw the closure of many established retailers like J.C. Penney, Debenhams, J. Crew, etc. Protracted lockdowns, low sales, mounting overhead expenses, knocked these retailers cold.

Millions across countries lost their jobs in the cities. They trudged back to their villages, making a living from the family agricultural business. Food security was an issue in many villages. These informal sector workers were assisted by some governments with direct cash transfers and free food grains. The middle-classes in the cities were left high and dry.

As the pandemic permeated, expatriates returned to home countries. Countries like Philippines, Bangladesh, Sri Lanka, which depended on remittances, took another blow. Online portals, like Amazon and Best Buy, prospered. Sales of formal clothing dropped, whilst casual apparel did well. Food delivery companies also thrived.

Companies engaged in the manufacture of foods and consumer products, did well in 2020. Everyone needs pasta, flour, toothpaste, antibiotics or analgesics. Consumers stocked foods, consumer products and medicines, petrified of long, unexpected lockdowns.

Factories closed due to weak consumer demand. Prices of commodities like oil fell sharply. Demand for metals, platinum, rubber, vehicles also tumbled, generating further unemployment. As COVID-19 persisted, countries and companies found it difficult to service their debts. They had to keep borrowing, raising the dangers of defaults and bankruptcies.

Hopefully, 2021, will see a revival of the economies.

Rajendra Aneja
Mumbai, India