Economic impact of the COVID-19 pandemic facts for kids

Kids Encyclopedia Facts

The COVID-19 pandemic caused big changes to the world's money and jobs. It led to a huge economic slowdown, sometimes called the COVID-19 recession. This was the second biggest global economic problem in recent history. Many businesses, especially those where people meet face-to-face, saw a big drop in customers during the COVID-19 lockdowns.

The pandemic also caused a 2020 stock market crash, which was the biggest weekly drop in the stock market since 2007-2008. We also saw problems with getting goods around the world, a rise in prices (inflation), and not enough of certain items, like computer chips. People sometimes bought too much of things they didn't need (called panic buying), and some stores charged much higher prices (called price gouging).

Governments around the world spent a lot of money to help people and businesses, which is called stimulus. The pandemic also played a part in the energy crisis and food shortages in 2021-2023.

Overall, the world's economy shrunk by 7% in 2020. Many businesses lost a lot of their income and had to let go of workers. Small businesses and those that needed people to be close together were hit the hardest. However, government help stopped many businesses from closing for good.

After the worst of the pandemic, the world economy was still very uncertain. Experts didn't agree on how long the problems would last or how quickly things would get better. A big increase in prices was linked to the pandemic. For example, energy prices went way up because many countries, especially in Asia, started needing a lot more energy as their economies recovered.

How it Started

Movement of WTI crude oil price from 2019. The crash started in mid-February 2020. On 20 April 2020, prices dropped below zero for the first time in recorded history.

The pandemic began in China around the time of the Chinese New Year holiday, which is a big travel season. To stop the virus from spreading, many events with large crowds were cancelled. Famous places like Hong Kong Disneyland and the Forbidden City in Beijing closed their doors.

Many workplaces in China stayed closed longer than usual after the New Year holiday. These areas made up a huge part of China's economy and exports. Hong Kong also declared an emergency, closing schools and cancelling celebrations.

The demand for things like masks and gloves (personal protection equipment, or PPE) went up 100 times. This caused prices to increase a lot and made it hard to get medical supplies quickly.

Big Economic Slowdown

The COVID-19 recession is a worldwide economic slowdown that started in 2020. Stock markets around the globe had their worst crash since 1987. In the first three months of 2020, the economies of the G20 countries (the biggest economies) shrunk by 3.4%.

Between April and June 2020, about 400 million full-time jobs were lost worldwide. The money earned by workers globally dropped by 10% in the first nine months of 2020. One study estimated the total cost to the world economy at $82 trillion over five years.

In Europe, businesses were investing a lot before the pandemic, but this slowed down quickly. When lockdowns happened, investment dropped a lot, especially in the middle of 2020. Many companies were worried about the future.

A survey found that 81% of businesses saw uncertainty as their biggest problem for investing. About 20% of European companies thought they would lose jobs permanently. This showed that many businesses were not sure they could "bounce back" easily.

However, half of European companies expected to use more digital tools in the future because of the pandemic. This was especially true for companies that already used digital technology.

Many governments spent a lot of money to help. This caused public debt (money owed by governments) to increase significantly in many places. For example, in the European Union, public debt was expected to be 95% of its total economy by the end of 2021.

The International Monetary Fund (IMF) and other groups predicted that the European Union's economy would shrink by 6% to 8%. This was the biggest drop since the Great Depression in the 1930s.

The amount the economy shrunk varied a lot between countries. It was less in Central and Eastern Europe and more in Southern Europe. In the United States, the economy also shrunk significantly.

People's income dropped a lot, which meant they spent less money. This especially affected families with lower incomes.

The pandemic hit different types of businesses very differently. Industries that rely on people being physically present, like travel, arts, entertainment, and restaurants, were hit the hardest. Their business dropped by up to 30%. Other industries, like farming, banking, and real estate, saw much smaller drops.

Many businesses faced problems getting money or loans. This was especially hard for small and new businesses. However, many businesses also received financial help, mostly from governments. This help was often in the form of money they didn't have to pay back.

The electronics industry in Europe was hit hard because there weren't enough computer chips. However, the digital sector was less affected by trade problems caused by COVID-19.

Helping the Economy Recover

Countries and cities around the world started programs to help their economies recover. Examples include "Next Generation EU" and the "Pandemic Emergency Purchase Programme."

Some studies suggested that if governments planned their recovery programs well, they could also help fight climate change. This means investing in things that are good for the environment, like clean energy. Governments and central banks promised a huge amount of money, about $19.5 trillion, to support the economy since the pandemic began.

The United Nations Environment Programme looked at $14.6 trillion spent globally in 2020. They found that only 2.5% of this money was used to fight climate change. They advised governments to use recovery spending to avoid the worst effects of climate change and inequality.

Population Changes

The COVID-19 pandemic caused more deaths around the world. The UN estimated that about 15 million people died due to COVID-19 in 2020 and 2021.

While deaths increased, the impact on birth rates was different in various countries. Birth rates in the US went down, but Germany saw a record high. In China, some thought lockdowns would increase births, but this didn't happen.

Overall population growth in the US fell to a very low level. In Australia, population growth slowed because fewer people were moving into the country.

Money Markets

The pandemic caused big problems in financial markets, including stocks, bonds, and goods like oil and gold. There was an oil price war that made crude oil prices crash. The stock market also crashed in March 2020.

The United Nations thought that developing countries would lose $220 billion in income. They expected the economic problems from COVID-19 to last for months or even years.

In the early part of the pandemic, the more cases there were, the more unstable the financial markets became. If governments and central banks hadn't stepped in to help, the economic problems would have been much worse.

Making Things (Manufacturing)

See also 2020–present global chip shortage.

Car Production Problems

Sales of new cars in the United States dropped by 40%. Big car companies in the US and Germany closed some of their factories. Airplane makers like Boeing and Airbus also stopped production at some plants.

In the UK, a survey showed that over 80% of manufacturing businesses expected their income to drop. They were also worried about how the pandemic would affect their operations. In July 2021, car production in the UK was at its lowest level since 1956.

Arts, Entertainment, and Sports

The pandemic hit the arts, entertainment, and sports industries very hard. Many cultural places like museums and theaters closed. Exhibitions, events, and performances were cancelled or postponed. Many people working in these areas lost their jobs or contracts.

Governments and charities offered financial help, but the amount of support varied a lot depending on the industry and country. In places like Australia, where the arts contribute a lot to the economy, the impact on people and the economy was significant.

Movies

The movie industry was greatly affected. Cinemas closed, film festivals were cancelled, and movie release dates were changed. As cinemas closed, global box office earnings dropped by billions of dollars. Meanwhile, streaming services like Netflix became much more popular, and their stock prices went up.

Almost all big movies that were supposed to come out after March were postponed or cancelled. Movie productions also stopped. The industry expected huge losses.

Sports

Most major sporting events were cancelled or postponed. This included the 2020 Summer Olympics in Tokyo, which were moved to 2021.

Television

The pandemic stopped or delayed the production of TV shows in many countries. However, streaming services like Disney+, Netflix, and Hulu saw a big increase in viewers.

Video Games

The video game industry was affected less than movies or sports. Since the outbreak started in China, there were problems with getting parts for some game consoles, which delayed their release and made them harder to find.

Several big video game events, like E3 2020, were cancelled. However, the economic impact on video games was not as big as in other entertainment sectors. This is because much of the work can be done remotely, and games can be sold digitally, no matter if stores are closed.

Medicine

The pandemic led to a big increase in demand for some medical services, like plastic surgery.

Books and News

The pandemic was expected to have a very bad effect on local newspapers in the United States, many of which were already struggling.

A major comic book distributor announced it would stop sending out comics and related items. This was seen as a huge threat to comic book stores. As a result, some publishers stopped printing comics, and others looked for new ways to sell them, including online.

Total book sales in the US went down in March 2020 after stay-at-home orders began. Bookstore sales dropped a lot. By June 2020, demand started to recover, except for educational books and bookstore sales. Most sales went to online stores like Amazon. Many books that were supposed to come out in spring were delayed until fall.

Shopping (Retail)

Best Buy was only letting a limited number of people into their Union Square store in New York City, 18 March 2020

The pandemic had a big impact on stores. Shopping centers around the world reduced their hours or closed temporarily. The number of people visiting shopping centers dropped by up to 30%. Also, people bought so many everyday items that store shelves became empty.

Some stores started offering home delivery or curbside pickup for online orders. By April, many stores were using "retail to go" models. About 40% of shoppers were buying online and picking up in-store, which was double the number from the year before.

Small farmers started using digital tools to sell their produce directly to customers.

Retail suffered 40–60% drop in footfall in Mar 2020

In mid-April, Amazon confirmed that workers in over half of its US warehouses had caught the coronavirus.

In May, retail sales in the United States saw a huge increase of 17.7% from April as states started to reopen. This was the biggest one-month jump in US retail history.

Store Closures

By April, big department stores like JCPenney, Nordstrom, Macy's, and Kohl's had lost billions of dollars in value. Some major retailers, like J.Crew and Neiman Marcus, filed for bankruptcy in May. JCPenney also filed for bankruptcy.

Pier 1 Imports announced it would close all its stores. Family Video also closed all its remaining stores in early 2021.

Online Shopping (E-commerce)

The pandemic gave a huge boost to online shopping. With more people staying home, online sales surged by 34% in 2020. In 2021, online sales reached levels that were not expected until 2025.

The pandemic changed how people shop. It made online shopping much more popular, even for things like groceries. New companies started, and new types of customers, like older people, began shopping online.

However, problems with transportation and production also affected online shopping. Customers worried if their goods would be shipped and delivered on time. Some online sellers also tried to trick customers during the pandemic. These problems showed that online shopping needed to become more regulated.

Social media played a big role, with Facebook and company websites becoming major sales channels. Global online sales are expected to reach $6.5 trillion by 2023, up from $3.5 trillion in 2019.

Restaurants

Signs on a Thai Restaurant in Crofton, Maryland

The pandemic greatly affected restaurants. Many cities in the US announced that restaurants could only offer takeout or delivery. This meant many servers and bartenders lost their jobs. Some employees created "virtual tip jars" to get help.

An initiative called the "Great American Takeout" encouraged people to support local restaurants by ordering takeout or delivery every Tuesday.

Science and Technology

The pandemic affected science, space, and technology projects. Space agencies like NASA and the European Space Agency stopped production on some projects and shifted to remote work.

The pandemic might have improved how scientists share information. A lot of data was released quickly on special websites, and scientists reviewed and published their findings at record speeds. This intense communication might have led to unusual levels of teamwork and efficiency among scientists.

Travel (Tourism)

A branch of SESC Hotels in São João da Barra, Brazil, closed due to the pandemic.

The pandemic had severe effects on global tourism because travel was restricted. People were afraid of airports and other crowded places, and they worried about getting sick while traveling. Many travel companies went out of business, and people in the tourism industry lost their jobs. Airfare costs also increased.

Events and Places

The pandemic caused many major events around the world to be cancelled or postponed. Some public places and institutions also closed.

Transportation

A nearly empty flight from Beijing to Los Angeles during the pandemic

Problems with staffing caused delays in trucking and at ports in many countries. A sudden demand for socially-distanced activities and alternatives to public transport led to a shortage of bicycles in the United States.

The cruise ship industry was also hit very hard, with the value of major cruise line companies dropping significantly. In many cities, planned travel went down by 80-90%.

Air Travel

Delta Air Lines planes parked on a taxiway at Kansas City International Airport. The planes are parked due to the sharp decrease in demand for air travel.

The pandemic had a huge impact on airlines because of travel restrictions and fewer people wanting to fly. Many flights were cancelled, and planes sometimes flew empty.

US passenger airlines received about $50 billion in government help.

Cruise Ships

Cruise lines had to cancel trips after the pandemic started. Bookings dropped, and cancellations increased as news stories about sick passengers on quarantined ships hurt the industry's image.

The value of cruise line companies dropped sharply. Some US senators questioned why these companies should get financial help if they are not based in the United States and don't pay US taxes.

Trains

Several train operators had to receive government help and reduced their scheduled services. For example, the German railway company, Deutsche Bahn, received billions of Euros in aid to cover big losses.

Job Losses (Unemployment)

The International Labour Organization predicted a 6.7% loss of job hours globally in the middle of 2020. This was like losing 195 million full-time jobs. They also estimated that 30 million jobs were lost in the first three months of 2020 alone.

The effects of COVID-19 on job losses lasted much longer than expected. Even 18 months after the pandemic started, some states in the US, like New York, still had far fewer jobs in the hospitality industry than before the pandemic.

In China, about 5 million people lost their jobs during the peak of the outbreak in Wuhan. Many migrant workers were stuck at home or in certain provinces.

US non-farm payrolls, 2005 – January 2022

In March 2020, over 10 million Americans lost their jobs and applied for government help. The total number of non-farm jobs in the US fell significantly.

The lockdown in India left tens of millions of migrant workers without jobs. In Canada, almost half of households experienced some type of job loss.

Nearly 900,000 workers lost their jobs in Spain. In France, 4 million workers applied for temporary unemployment benefits, and in Britain, 1 million workers applied for a special government scheme.

Almost half a million companies in Germany used a government-supported "short-time working" scheme. This scheme was copied by France and Britain.

The combined impact of job losses, less money for families, and changes in food prices could make it very hard for people in the most vulnerable countries to get enough food.

Impact on Genders

Around the world, women often earn less, save less, and are more likely to be single parents. They also tend to have less secure jobs, especially in the informal economy or service sector, with fewer social protections like health insurance or paid sick leave. This means they are less able to handle economic problems than men.

For many families, school closures and social distancing meant women had more unpaid care and housework at home. This made it harder for them to do paid work. The situation was worse in developing countries, where more people work in the informal economy with fewer protections.

Unlike previous crises, the COVID-19 pandemic affected more industries where women work, such as retail and hospitality. Women were also on the front lines fighting COVID-19, as most healthcare workers are women.

In Japan, women were hit harder by the pandemic because many work in retail and hospitality, which were greatly affected.

Economic Fairness (Inequality)

Since many people who kept their jobs could work online, and online jobs generally pay more, the pandemic made income inequality worse. It hit low-paid workers harder.

Also, the number of people living in extreme poverty increased during the pandemic. This made economic inequality even worse. The global extreme poverty rate went up from 8.9% in 2019 to 9.7% in 2020. This was the first time it had risen in decades. This happened because many low-income workers lost their jobs or had their income reduced. While some countries managed to reduce poverty with good government policies, the overall trend showed a growing gap between those who were financially stable and those who were not.