Impacts of the COVID-19 Pandemic on Global Economy and Household Wealth

Abstract

This paper provides an assessment of the impacts of the COVID-19 pandemic on global economic activities and household wealth creation. The results show that 81% of the economies surveyed by the World Bank suffered economic downturns in 2020. Global gross domestic product (GDP) declined by 3.29% in 2020, compared to an average annual growth rate of 3.05% over the five years prior to the outbreak of the pandemic. This amounts to a shrink of 2.8 trillion in current dollars for the economies. If we assume that the world economy in 2020 would have expanded at the average five-year pre-COVID rate of 3.05% without the pandemic, the real damage to the world economy caused by the pandemic amounts to 5.5 trillion in current dollars. However, global household wealth turned out to be resilient. Total global household wealth rose by 7.4% or $28,716 billion in 2020. Cross-country analyses indicate that change in household wealth is positively and significantly associated with the five-year average GDP growth prior to the pandemic and with the level of wealth, suggesting that wealth begets more wealth despite the pandemic.