Five Years After the Pandemic: Reshaping Global Economies and Markets

The COVID-19 pandemic has left an indelible mark on the global economy, with far-reaching consequences that continue to shape economies and markets five years after it was first declared a pandemic by the World Health Organization. The impact of the pandemic has been multifaceted, affecting government debt, labour markets, consumer behavior, inequality, remote work, digital payments, and travel patterns.

Debt, Inflation, and Interest Rates

One of the most significant impacts of the pandemic has been on global government debt. According to data from Fitch Ratings, the average global sovereign credit score remains a quarter of a notch lower than it was when the pandemic started, reflecting financial challenges made worse by the pandemic, inflation, and stricter financial conditions. This has led to higher borrowing costs on international capital markets for less wealthy emerging market countries. The average global government debt has risen by 12 percentage points since 2020, with steeper increases seen in emerging markets.

The pandemic sparked high levels of inflation, which proved to be a major concern in the 2024 U.S. elections. Fuelled by post-lockdown spending, government stimulus packages, and shortages of labour and raw materials, inflation peaked in many countries in 2022. To offset rising prices, central banks raised interest rates, though the intensity of their interventions varied widely. Sovereign credit ratings were driven lower as economies were shuttered and governments took on huge amounts of extra debt to fill the holes left in public finances.

The effects of inflation have been particularly pronounced in emerging markets, where higher borrowing costs have made it more challenging for countries to service their debt. In some cases, this has led to a reduction in sovereign credit ratings, which can have far-reaching consequences for a country's ability to access international capital markets.

Labour and Travel Shifts

The pandemic caused millions of job losses, with poorer households and women hit hardest, according to the World Bank. As lockdowns eased, employment regained momentum but with a considerable shift towards sectors such as hospitality and logistics due to the growing retail delivery sector. Women's participation in the workforce fell in 2020, mostly due to female over-representation in hard-hit sectors like accommodation, food services, and manufacturing, and the burden of caring for children staying home from school.

However, the gender employment gap has slightly decreased since, data shows. Travel and leisure habits also changed, with a reduction in commuting in major cities such as London. In London, use of both tubes and buses remains at around a million fewer journeys a day than pre-pandemic. The airline sector was one of those hit worst by the pandemic, recording industry-wide losses of $175 billion in 2020, according to the global airlines body IATA.

Vaccination campaigns eventually resulted in the lifting of travel restrictions, allowing people back on planes. For 2025, IATA expects an industry-wide net profit of $36.6 billion and a record 5.2 billion passengers. However, travellers must contend with prices of hotel rooms which in many regions have outpaced inflation and remain well above 2019 levels.

Ushering In A Digital World

New consumer trends developed during global lockdowns, as home-bound consumers often had no other option than to shop online. This caused an uptick in online purchases from 2020 that has since stabilised. Analysts say that in Europe the rise in online sales has been coupled with an increase in selling space, as retailers invest in physical shops to stimulate both online and offline sales.

The space, measured in square metres, edged up almost 1% from 2022 to 2023, an increase that should extend to 2.7% by 2028, data from market research company Euromonitor shows. Shares in digital and delivery firms led gains during the pandemic, alongside those of vaccine-making pharmaceutical companies.

Five years on, some pandemic-era gainers have lost most of their appeal, but others have enjoyed lasting gains as new markets enabled by the digital shift have opened up. Despite the bursting of some bubbles and the collapse of crypto exchange FTX, which left the industry reeling, the value of Bitcoin has increased by 1,233% since December 2019, as people looked at new investment opportunities to cut the risk of market volatility.

Conclusion

The COVID-19 pandemic has had a profound impact on global economies and markets. The effects of the pandemic continue to be felt today, with government debt, labour markets, consumer behavior, inequality, remote work, digital payments, and travel patterns all being reshaped in lasting ways. While some areas have recovered more quickly than others, there is little indication that global hotel prices will return to pre-pandemic norms or that office vacancy rates will decrease significantly.

As the world continues to adapt to a post-pandemic reality, it is clear that the pandemic has ushered in a new era of digital transformation. New consumer trends have developed, and investment opportunities have opened up as a result of the digital shift. While there are challenges ahead, it is also clear that some areas will continue to thrive in this new landscape.