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Rich Countries Experience Surprisingly Quick Recovery While Poor Countries Lag

Rich Countries Experience Surprisingly Quick Recovery While Poor Countries Lag

When the world was in the depths of the Coronavirus Pandemic, it appeared to many that an economic return might take some time. Now that we’re in the third quarter of 2021, it appears that the economic recovery has been better and faster than anyone could have imagined.

The economy rebounded in the spring beyond levels it had been prior to the start of COVID. However, we aren’t out of the woods yet with the Delta Variants spiking in recent weeks. Those who have not been vaccinated are getting sick enough to go to hospitals causing strain on the countries’ medical networks and many of them are dying. Meanwhile, those of us who have been vaccinated appear to be adequately protected. Although some vaccinated people have caught the virus, it is at minimal levels, very few if any are being hospitalized, and no one who had been vaccinated has died.

A World Of Haves And Have Nots

The resurgence of the virus appears to be upsetting attempts of rich Asian countries from rebounding as much as the rich western countries and the poorer countries are lagging behind.

An analysis indicates that the better economy for the western nations is due to more of their populations getting vaccinated. The lowest vaccination rates are among the countries of Africa causing their economic recovery to lag behind.

According to the International Monetary Fund (IMF), nearly 40 percent of the populations in advanced economies have been fully vaccinated while only 11 percent has been vaccinated in emerging economies.

The countries with the greater rate of recovery have also been spending on large-scale government programs that have helped create a spending spree that has supplemented the gains.

While the world awakes from its sleep, the supply chain has felt the strain causing shortages and some inflation that is higher than we have seen in several years. A perfect storm is occurring that combines restraints in the labor markets with a demand surge, which is causing the inflation. As a result, central banks are beginning to raise interest rates to make money a little less easy to obtain to curb inflation. This could cause restraints on the economy in the mists of the recovery.

The economies of the European countries had grown at an annual rate of 83 percent in the second quarter of the year. That’s greater than the return experienced by the U.S. economy during the same period.

The economy in the United States grew at an annual rate of 6.5 percent during the second quarter, which has allowed the country to reach higher levels than existed before the pandemic. An extraordinary increase in consumer spending and business investments has been given credit for the boom.

Examples of individual businesses seeing rise in revenue include French luxury business LVMH Moët Hennessy Louis Vuitton. The company has reported revenue of €28.7 billion for the first half of 2021. That’s 14 percent better than the same period in 2019.

Pfeiffer Vacuum Technology AG, a German vacuum pump manufacturer, reported a spike in orders of more than 40 percent in the past year.

In China, the rate of activity in manufacturing grew at a slower pace in June because of disruptions at the country’s largest ports due to a spike of the Delta variant of the Coronavirus. The new strain was discovered in more than 12 cities in July. This resulted in a strict lockdown.

Jerome Powell, chairman of the Federal Reserve commented that uneven global growth could affect the economic expansion in the U.S.

Some companies reported a boost in revenue during the pandemic last year. AT&S, an electronics manufacturer based in Austria, experience a huge jump in demand for components it produces for other companies including Apple and Intel.

The company forecasts that its revenue will more than double over the next five years to €3 billion, or about $3.6 billion. It is currently hiring hundreds of workers in Europe. It also intends to hire another 5,000 people to staff a new €1.7 billion factory in Malaysia.

Economists Remain Cautious

Germany is currently Europe’s biggest economy and yet business expectations are dampened due to worries about the supply chain restrictions as well as a spike in COVID infections, according to a survey published by a think tank called IFO. The inflation rate in Germany rose to 3.1 percent in July, the highest level since August 2008.

Greece has imposed social constraints on Mykonos, an island that depends on money spent by holiday visitors. Spain has imposed social limits on Catalonia due to a spike in the Coronavirus. International tourism to Europe was down by 85 percent for the first five months of 2021 compared to the same period in 2019, the United Nations’ Organization for World Tourism reported.

The IMF recently lowered its expectations of growth for five Southeast Asian countries – Indonesia, Malaysia, Philippines, Thailand and Vietnam.

A lack of vaccinations is disrupting any economic resurgence in Vietnam and Indonesia. Businesses were ordered to operate at limited capacity to help prevent the spread of the virus. The problem with the global supply chain also continues to affect those countries. Factories in Ho Chi Minh City stopped operations during a portion of July.

The Finance Ministry in Thailand revised its predictions on the country’s growth rate for 2021. It has reduced its growth forecast of 2.3 percent to a disappointing 1.3 percent. The drop in revenue is due to a limited influx of foreign tourists. The country recently experienced a record spike in COVID-19, which has also dampened any chances for a robust recovery. Japanese automobile manufacturer Toyota continues a stop in production at factories in Thailand due to a components shortage.

The IMF forecasts that Nigeria, Africa’s largest economy, will grow only 2.5 percent this year, regardless to the rise in oil prices. Nigeria is a major supplier of oil. The South African Reserve Bank predicts that it will take Nigeria until some time in 2023 to achieve pre-pandemic economic levels.

Businesses Learn From The Pandemic

They say that those who don’t learn from history are destined to relive it. It appears that many global businesses have learned from the adage and have made modifications due to the pandemic. Companies are becoming a lot more efficient because COVID-19 has forced them to change business models. As a result of COVID, many businesses are embracing technology. Consider this: The U.S. economy has returned to pre-pandemic level of output despite having nearly seven million fewer workers.

A severe drop in business and leisure travel during the height of the pandemic resulted in a sharp decline of revenue for Sixt SE, a car-rental business headquartered in Munich. As a result, it reduced its fleet of cars, cut staff, and introduced innovative new services including long-term rentals. It also automated and streamlined its operations, ended its low-margin business, and invested in a pricing system that assists in increasing car use and rates. Now its revenue is rebounding and its costs are 15 percent lower than it was in 2019.

It’s obvious that with the massive increase in Coronavirus patients in hospitals and the extreme rise of deaths of people who have not been vaccinated, we are definitely not out of the woods. However, it appears that we now have the tools to make things better causing more hope that we’re near the end of the tunnel as far as the COVID-19 nightmare is concerned.