The Global Economy Is Suffering From Long COVID

In many respects, COVID-19 was not a temporary disruption.

Three years ago, a biweekly trip to the grocery store was the height of entertainment. It was the only time I ventured outside of my property line, and I tried to make the most of it. I strolled slowly through every aisle to appreciate the change of scenery, even if I didn’t need anything from that particular section. Once, someone asked me to help them get an item off the top shelf; the exchange represented a 100% increase in my network of personal contacts.

Memories like that came up frequently during my trip to China last month, where I compared pandemic experiences with colleagues and clients. COVID is still fresh in their minds, so the past is still somewhat uncomfortable. I told them that each day allows a more complete embrace of normalcy and that the day will come when they’ll reflect on the past three years with some bemusement.

Recent headlines in the United States have declared an official end to the pandemic era. A defining development was the expiration of government programs enacted in 2020 to protect the population. This milestone validated what people have sensed for some time; the virus is no longer very threatening, and our routines are largely unconstrained. But the pandemic has changed life and commerce in unalterable ways. Like many survivors, the global economy is dealing with long COVID.

Higher For Longer

In the near term, economies are still recovering from the demand and supply shocks created by the pandemic. The inflation that resulted from the two forces has necessitated more restrictive monetary and fiscal policies around the world. Rapid increases in interest rates have proven difficult for borrowers and contributed to an outbreak of banking stress earlier this year. A higher yield environment may also eventually stress the solvency of some emerging markets.

Central Bank Rates