Socio-economic Impact of the COVID-19 Pandemic and Anti-crisis

Measures

Irina Minakova

, Tatyana Bukreeva

and Lucrețiu Dancea

2 c

Faculty of Public Administration and International Relations, Southwest State University,

50 let Oktyabrya 94, Kursk Russia

Banat’s University of Agricultural Sciences and Veterinary Medicine, “King Michael I of Romania” (USAMVBT),

Calea Aradului 119, Timișoara, Romania

Keywords: Pandemic, World Economy, Socio-economic Crisis, Anti-crisis Programs, Economic Growth.

Abstract: According to the Organization for Economic Cooperation and Development, in 2021 the economic losses

from the pandemic will amount to about USD 7 trillion. It will exceed the losses from the global economic

downturn of 2008 known as ‘the Great Recession’. The Covid-19 pandemic has had a huge impact on both

the global and Russian economies. Due to the quarantine, many companies were forced to temporarily close;

there was a decrease in aggregate demand and a rise in unemployment. According to official data, in 2020

Russia’s GDP decreased by 3.1% compared to the previous year and the household income decreased by

3.5%. From January to August 2020, the unemployment rate in Russia increased from 4.7% to 6.4%, the

highest over the past 8 years. A wide range of anti-crisis measures is involved to overcome the consequences

of the economic crisis that engulfed almost every country. These measures can be implemented in monetary

policy and fiscal policy. The purpose of the research is to systematize the socio-economic consequences of

the pandemic for the Russian economy and developed economies, and analyse the anti-crisis measures taken

by them. The study was carried out on the basis of statistical and economic analysis, synthesis, comparison,

analogy, modelling, and expert forecasts.

1 INTRODUCTION

The COVID-19 coronavirus pandemic has

precipitated the world’s biggest economic crisis since

the Second World War. According to the World Bank

forecast, the total loss from the pandemic will exceed

USD 10 billion in 2020-2021 (La finance pour tous,

2021). The overall economic losses relative to the

downturn could be much greater due to the long-term

impact on investment and education.

Since Covid-19 was detected in China at the end

of 2019, the way people live changed. To measure its

short-term economic impact, we compare the current

dynamics of GDP with that observed before the

pandemic. For this purpose we analyse the World

Bank forecast predicting the dynamics of GDP in

January and December 2020.

https://orcid.org/0000-0001-6838-7940

https://orcid.org/0000-0001-7010-4591

https://orcid.org/0000-0002-0127-1377

In January 2020, the World Bank forecasted GDP

growth of 2.5% in 2020 and 2.6% in 2021. However,

in reality the GDP dropped by 4.3% in 2020, and this

indicator was expected to decrease by 4% in 2021 (La

finance pour tous, 2021).

According to the World Bank forecasts, global

GDP will reach USD 87.384 billion in 2021. Before

the pandemic, according to calculations, global GDP

should have reached USD 89.993 billion in 2020 and

USD 92.333 billion in 2021. Thus, the damage caused

by the pandemic to the global economy will exceed

8,200 billion euros, which is equal to Germany’s

biennial GDP.

One of the distinguishing features of the current

economic crisis is that it is universal in nature and

affects almost all countries of the world.

The worst-hit region was Latin America and the

Caribbean, where cumulative losses over two years

Minakova, I., Bukreeva, T. and Dancea, L.

Socio-economic Impact of the COVID-19 Pandemic and Anti-crisis Measures.

DOI: 10.5220/0011119700003439

In Proceedings of the 2nd International Scientiﬁc and Practical Conference "COVID-19: Implementation of the Sustainable Development Goals" (RTCOV 2021), pages 305-310

ISBN: 978-989-758-617-0

305

are estimated at 16.5% of pre-crisis GDP. They are

followed by the Middle East, North Africa and the

Eurozone, with a combined loss of 14.8% of 2019’s

level of GDP. It is expected that the economic losses

from Covid-19 of the Asia-Pacific region will be least

perceptible; it will amount to about 8% of 2019’s

level of GDP. At the same time, the region will keep

positive dynamics of GDP at the level of 0.9% in

2020 and 7.4% in 2021 (La finance pour tous, 2021).

However, these are short-term consequences of

the Covid-19 pandemic, while its impact on the global

economy will presumably continue until 2023, when

the economy will return to pre-crisis levels of

economic activity.

The most important area affected by Covid-19 is

education. The current pandemic is destroying

education systems around the world. The loss of

income due to the economic downturn will negatively

affect the availability of educational services for the

population, especially in countries where higher

education is expensive. This can lead to a reduction

in human capital, which is an important factor in

economic growth.

On the other hand, the economic downturn has

been followed by an increase in global poverty.

According to research, global extreme poverty

dropped dramatically in the period 1990-2017. In

1990 about 1.9 billion people lived on less than USD

1.90 a day, this indicator decreased by more than 60%

over 30 years, and in 2017 about 690 million people

suffered from poverty (La finance pour tous, 2020).

However, according to the World Bank, the Covid-19

pandemic can reverse this trend and bring rising

poverty back.

According to the pessimistic scenario, there will

be more than 730 million extremely poor people in

the world in 2021; almost 150 million more than in

January 2020 before the start of the Covid-19

pandemic. At the same time, unemployment

continues to rise. Almost a year after the start of

pandemic, the unemployment rate in the Eurozone

rose from 7.4% in December 2019 to 8.3% in

December 2020 (Albert, 2021).

The COVID-19 pandemic has led to an increase

in public debt in all countries of the world (Figure 1)

(Tadviser, 2021).

Figure 1: Change in fiscal pressure between 2021 and 2060.

According to the OECD, in order to preserve

public services and benefits and stabilize debt in such

conditions, governments will have to increase

revenues by almost 8% of GDP. In some countries,

including France and Japan, this figure will be more

than 10% of production volume without regard to

such new costs as climate change adaptation.

At the beginning of 2021 uncertainty about the

effect of restrictions on economic activities remains.

The situation is aggravated by the emergence of new

strains of the virus. Everything will depend on Covid-

19 dynamics and compliance with the imposed

restrictions.

2 MATERIALS AND METHODS

The paper covers statistical and analytical data

presented in publications of modern Russian and

foreign experts. In particular, the socio-psychological

consequences of Covid-19 are disclosed in the works

of Prima M., Randana C., Syakurah R. (2021),

Phillipou A., Tan E. J., Toh W. L., Rheenen T. E.,

Meyer D., Neill E., Sumner P., and Rossell S. L.

(2021), Birner R., Blaschke N., Bosch C., Daum T.,

Graf S., Güttler D., Heni J., Kariuki J., Katusiime R.,

Seidel A., Senon Z. N., Woode G. (2021), Chew

A.W.Z., Wang Y., Zhang L.M. (2021), Chu Z., Cheng

M.W., Song M.L. (2021), Zheng X.Y., Ruan C.H.,

Zheng L. (2021). The economic impact of the

pandemic is studied by König H-H., De Bock F.,

Sprengholz P., Kretzler B., and Hajek A. (2021),

Stein F. (2021), Tran P.H.H. (2021) and others.

The purpose of the research is to systematize the

socio-economic consequences of the pandemic for

the Russian economy and developed economies, and

analyse the anti-crisis measures taken by them.

The study was carried out on the basis of

statistical and economic analysis, synthesis,

comparison, analogy, modelling, and expert

forecasts.

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3 RESULTS AND DISCUSSION

The service sector, in particular small and medium

enterprises, has been affected the most by the

pandemic and lockdown. It is noteworthy that in large

developed countries the share of small and medium

enterprises in the economy exceeds 60%, while in

Russia it is no more than 22%. That is why the impact

of the coronavirus pandemic on the domestic

economy turned out to be quite mild compare to more

developed economies.

Tourism industry has suffered greatly from the

pandemic. The Russian tourism business lost 1.3

billion roubles in 2020 or 33% of its annual turnover.

Due to the spread of coronavirus, hundreds of

thousands of labour migrants were forced to leave

Russia. This led to a shortage of personnel in such

industries and business areas as housing and utilities,

delivery and taxi services. The number of issued work

permits and patents decreased from almost 1.5

million in 2019 to 935 thousand in 2020 (Ageeva,

2020). As the statistics, migrants make up 7% of the

Russian labour force and provide about 6% of GDP.

Due to shopping mall closures and restrictive

measures in supermarkets, e-commerce has begun to

thrive. Perhaps, online commerce is the only sector

that has won amid the coronavirus pandemic.

According to statistics, in the first half of 2020, the

share of e-commerce in the total trade turnover in

Russia was 10.9% (in 2019, this figure did not exceed

6.1%) (Finance. Rambler, 2020).

The logistics industry is also developing rapidly,

in particular the express delivery and courier market.

Delivery services, in turn, contributed to the

development of warehouse real estate. Thus, the

volume of online products in Moscow warehouses

increased 10 times over the year: from 5% to 51%

(Malina, 2020). Due to online stores, in the third

quarter of 2020 the volume of leased and purchased

warehouse space reached 861,000 sq. m, which is

almost 200% more compared to 2019 (Malina, 2020).

Warehouses are the main component of online

trading that is why this sector is now one of the most

developing in real estate. In 2020, it invested 26.6

billion roubles in new storage platforms. In 2021,

demand and interest in opening such facilities

continues to grow.

Nowadays, innovation-oriented investments are

engaged in order to help businesses operate

successfully amid the devastating impact of the

pandemic. It is noteworthy that research and

development expenditures continued to grow even in

2020, exceeding their pre-crisis level. Moreover,

R&D spending has been more stable during the

pandemic-related economic downturn than during

other crises. At the same time, the consequences of

the crisis were very uneven in different sectors.

Producers of computer software, internet and

communication technologies, computer hardware and

electrical equipment, pharmaceuticals and biotech

products have significantly increased investments in

innovations and expanded their research and

development activities. In contrast, transport

companies and the tourism industry, the most affected

by the pandemic, have cut their innovation

expenditure.

According to the annual ranking of world

economies in terms of innovative development, high-

income countries traditionally maintain the leading

positions, with middle-income countries such as

China, Turkey, Vietnam, India and the Philippines

following them (Table 1) (OMPI, 2021). Switzerland,

Sweden, the US and the UK have been leaders of this

table for the past three years. The Republic of Korea

entered the top five innovation-driven economies in

2020. At the same time, there are another four Asian

countries in the top 15; Singapore (rank 8), China

(rank 12), Japan (rank 13) and Hong Kong (rank 14).

Table 1: Global innovation index.

Countr

Rank 2021 Rank 2020

Switzerland 1 1

Sweden 2 2

the US 3 3

the U

4 4

the Re

ublic of Korea 5 10

the Netherlands 6 5

Finlan

7 7

Singapore 8 8

Denmar

9 6

German

10 9

France 11 12

China 12 14

Japan 13 16

Hong Kong (China) 14 11

Israel 15 13

Canada 16 17

Icelan

17 21

Austria 18 19

Irelan

19 15

Norwa

20 20

North America and Europe continue to dominate

in innovation development, far ahead of other

regions. Southeast Asia, East Asia and Oceania have

shown the fastest growth rates over the past decade,

approaching the leaders. China remains the only

middle-income country among the top 30 innovation

economies. Other middle-income countries rank

Socio-economic Impact of the COVID-19 Pandemic and Anti-crisis Measures

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lower in the Global Innovation Index: Bulgaria (rank

35), Malaysia (rank 36), Turkey (rank 41), Thailand

(rank 43), Vietnam (rank 44), Russia (rank 45), India

(rank 46), Ukraine (rank 49) and Montenegro (rank

50). However, Turkey, Vietnam, India and the

Philippines are gradually closing the gap. These large

economies have the potential to affect the Global

innovation index ranking.

At the same time, in 2020, there was a significant

reduction in foreign direct investment. Due to the

effects of the pandemic, foreign direct investment

decreased by 42% compared to 2019 and reached

USD 859 billion compared to USD 1,500 billion in

2019 (UN News, 2021). In addition, investment flows

were extremely uneven. In 17 of 27 member states of

the EU, including Germany, Italy, Austria and

France, foreign direct investment decreased. On the

other hand, investment in Sweden doubled to USD 29

billion, and investment in Spain increased by 52%.

A significant decrease in foreign direct investment

was also recorded in the US (-49%, to USD 134

billion). Overall, foreign direct investment flows have

dropped sharply in some large Western European

countries as well as in Russia. However, foreign

direct investment plunged only by 12 % or USD 616

billion in developing countries. Thus, the share of

developing countries in international investments

reached 72% in 2020. The inflow of foreign direct

investment to China increased by 4% and amounted

to USD 163 billion compared to USD 53 billion in

2003, which made China a leading global beneficiary

in 2020 (UN News, 2021).

The pandemic had a serious impact on the

dynamics of bankruptcy. According to statistics, in

2020, in Russia the wave of pandemic bankruptcies

began among individuals, where the number of

bankruptcies increased by 72.6% compared to 2019.

The number of corporate bankruptcies, on the

contrary, decreased, legal entities went bankrupt in

2020 19.9% less often than in 2019 (Gordeev, 2021).

This situation was a consequence of the state’s

moratorium on the bankruptcy of small and medium-

sized businesses. Thus, a ‘deferred effect’ arose:

enterprises that did not fulfil their debt obligations

could not find themselves in bankruptcy proceedings

due to the existing moratorium, i.e. the procedure was

postponed for some time. Lending to individuals

increased during the pandemic, since Russians who

lost their jobs or part of their income during the period

of restrictive measures began to use new loans in

order to pay off the old ones and to ensure their

subsistence. The number of overdue payments also

has increased significantly. As the coronavirus

continues to spread, new restrictive measures have

been put in place, and it is obvious that the number of

bankruptcies will grow.

A wide range of anti-crisis measures is involved

to overcome the consequences of the economic crisis

that engulfed almost every country. These measures

can be implemented in monetary policy and fiscal

policy. Within the Eurozone, monetary policy is

carried out for all member countries by the European

Central Bank. In particular, in March 2020, the bank

resumed the purchase of securities, thus ensuring the

flow of additional financial resources into the

economy, thereby easing the terms of lending, with

which both private and state economic agents are

currently forced to resort.

As for the fiscal policy, it remains specific to each

state. In such countries as France, Germany, Spain,

the UK, the Netherlands and Italy, it comes down to

increasing government spending in order to revive the

economy and mitigate the effects of the economic

downturn. France has spent 184.6 billion euros on the

implementation of anti-crisis measures, which is

7.6% of GDP, in terms of funds allocated for the

elimination of the consequences of the pandemic; it

occupies the third position of the six countries.

Germany is the leader in this ranking where the

amount of allocated funds there exceeds 290 billion

euros (in Spain – 138.59, in the UK – 228.96, in the

Netherlands – 62.49, and in Italy – 67.90) (La finance

pour tous, 2021). The limited resources for

overcoming the consequences of the pandemic

allocated in Italy constitute only 3.8% of GDP.

Fiscal policies implemented in EU countries are

aimed at reviving household demand (for example,

increasing social benefits in the UK) and stimulating

supply, in particular through subsidizing

entrepreneurship. For example, France has expanded

business investment, which accounts for over 58% of

all allocated financial resources, while 89% and 67%

of all resources in the Netherlands and the UK

respectively are demand-oriented.

The economic damage from the coronavirus is

mitigated by providing tax incentives to individuals

and businesses affected by the pandemic,

compensating for loss in income due to the forced

suspension of their activities. These measures have

increased disposable income in many developed

countries, to a lesser extent in developing countries,

and, thereby, to prevent further reduction of total

expenditures in the economy.

For entrepreneurs, the provision of guarantees for

loans and the restructuring of their debt are effective.

These measures will allow solvent, but illiquid

companies to stay in the economy and maintain

established production relations.

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At the same time, laid-off employees are engaged

in varies retraining programs that will allow them to

be employed in other sectors of the economy less

affected by the pandemic. Given that retraining can

take a certain amount of time, laid-off employees

should receive benefits for the entire period of

retraining and job-seeking.

In Russia, a number of measures are also being

taken to maintain aggregate demand in the economy.

In particular, Russian families with children aged 3 to

16 received a one-off payment of 10,000 roubles per

child (starting June, 2020), a one-off payment of

10,000 roubles per child aged under 16 (starting July,

2020), a monthly allowance of 5,000 roubles per child

aged under 3 (from April to June 2020), a one-off

New Year’s payment of 8,000 roubles per child under

the age of 8, a one-off payment of 3,000 roubles per

child to households with unemployed parents (from

April to September 2020). Direct transfers compared

to targeted measures of state support reduce the cost

of the subsidy to the final recipient (Minakova,

Bukreeva, Masalov, Galchenko and Kharlanova,

2019).

The second important measure is assistance to

small and medium-sized enterprises, and borrowers,

facing tough economic times. Thus, banks offer

‘repayment holiday’, i.e. consumer credits and

mortgage loans repayments are postponed for a

period up to 6 months. There are free vocational

training and continuing education programs (World

Skills Russia), reimbursement of labour costs in

organizing public works and creating temporary jobs,

‘freezing’ of obligations for loans for up to 6 months,

expansion of the concessional lending program, etc.

In addition, targeted support is provided for the

basic industries of the country’s economy, which are

most affected by the pandemic, i.e. the agro-industrial

complex, domestic tourism, and transport.

4 CONCLUSIONS

As the situation evolves, the impact of the pandemic

on various industries and businesses is becoming

more evident. In this regard, it is possible to

determine which interventions are most effective and

how to adapt them to a specific situation. In this

situation, it is inexpedient to use tariff and non-tariff

trade barriers, especially for the supply of medical

equipment and individual protection resources. In

addition, the use of tariff instruments negatively

affects the volume of world trade and, as a rule,

causes compensatory fluctuations in exchange rates.

It is expected that when Covid-19 restrictions are

removed, the growth of the world economy will

average up to 4.3% in 2021 (De Grandi, 2021).

According to forecasts, it will amount to 3.2% in the

USA (compare to -3.7% in 2020), 1.6% in Japan

(compare to -5.3%), and 7.5% in China (De Grandi,

2021). In general, in Asian countries, GDP growth

will amount to 6.7% (compare to -0.2% in 2020).

These countries will become the ‘locomotive’ of the

world economy.

ACKNOWLEDGEMENTS

The publication was carried out within the framework

of the State Task of the Ministry of Science and

Higher Education of the Russian Federation (topic

No. 1.13.20 F ‘Conceptual foundations for ensuring

economic security of the Russian Federation in the

conditions of digitalization: contours of spatial

transformations’).

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