New Socio-economic Picture of the World: Consequences and

Challenges of Coronavirus

Ekaterina Dmitrieva

Moscow State University of Civil Engineering, Yaroslavskoye Shosse, 26, Moscow, Russia

Keywords: Coronavirus Pandemic, World Economy, COVID 19, Socio-Economic Impact, Coronavirus Recession.

Abstract: The subject of this research is to study the impact of the socio-economic consequences caused by the

coronavirus pandemic on the state and development of the world economy. The aim of the study is to identify

factors, highlighting the features of their influence on the state and development of the world economy, as

well as analyzing the socio-economic consequences of the spread of COVID-19 and highlighting the main

changes that the world economic system is undergoing today. The study involved a set of methods of practical

analysis, including the analysis of statistical data, forecast estimates of changes in the GDP growth rate, as

well as macroeconomic modeling of the possible consequences of the coronavirus pandemic on the state and

development of the world economy. The result of the study is the identification of the features of the current

situation, as well as the determination of the economic and social changes taking place in the world economic

system. As a conclusion, it should be noted that in the new emerging conditions, it is important for national

governments and international institutions to quickly and efficiently respond to global challenges and threats

that the modern world faces.

1 INTRODUCTION

For almost two years now, the world community has

been living in completely new conditions. On March

11, 2020, WHO officially stated the emergence of a

new coronavirus infection and announced a

pandemic.

Nowadays, discussions of the consequences and

challenges of the coronavirus (COVID-19) and new

strains that have negatively affected the established

socio-economic processes around the world are of

increasing interest in scientific circles.

Most large research centers and international

analytical companies around the world are actively

conducting research to study the nature of the

coronavirus, which is new to mankind, and the

emergence of new strains against its background in

order to find ways to hold and control it. However, at

the moment, there are not many large scientific works

in the form of author's or collective monographs,

which is probably due to the novelty of the problem.

In most cases, there are some reviews of international

organizations or financial institutions on the

https://orcid.org/0000-0002-7754-0975

development of economic processes during a

pandemic period.

Today it becomes obvious that the world

community is dealing not just with a new type of

biological virus that caused a pandemic, but with a

certain threat that led to profound and irreversible

changes around the world, affecting almost all areas

of activity at the global level – international and legal,

political, financial, social, etc. The consequences of

the coronavirus pandemic were especially painful for

the national economies and social spheres of most

countries of the world, whose government was unable

to reasonably respond to the “new viral challenge”.

Despite the fact that the 21st century is the century of

digital and highly developed technologies in all

spheres of activity, including biomedical one, at the

same time, humanity turned out to be almost helpless

in front of the new coronavirus infection COVID-19.

It remains only to admit that we are entering a new

“viral-biological era”, which is beginning to radically

change today's world (The Global Risks…, 2021;

Economics…, 2020).

The formation of a new socio-economic picture of

the world caused by the worldwide spread of

Dmitrieva, E.

New Socio-economic Picture of the World: Consequences and Challenges of Coronavirus.

DOI: 10.5220/0011120900003439

In Proceedings of the 2nd International Scientiﬁc and Practical Conference "COVID-19: Implementation of the Sustainable Development Goals" (RTCOV 2021), pages 373-379

ISBN: 978-989-758-617-0

373

coronavirus infection (COVID-19) makes the world

community take a fresh look at the mechanisms for

achieving socio-economic stability and the prospects

for the development of global and national economic

systems (Yarovova, 2020).

In this regard, the purpose of this study is to

identify factors and highlight the features of their

influence on the state and development of the world

economy, as well as to analyze the socio-economic

consequences of the spread of COVID-19 and

highlight the main changes that the world economic

system is undergoing today.

The infection of a new type of coronavirus

continues to spread, wreaking havoc on the entire

system of domestic and international interaction. In

this regard, it is necessary to make competent and

balanced management decisions based on economic

and social research. It is necessary to take the most

effective measures that will help to preserve and

maintain not only the level of social security of

citizens, but also to preserve the very system of socio-

economic relations in the country and the world as a

whole. That is why the issue of identifying the main

trends in the transformation of economic processes in

a pandemic and their further analysis in the context of

ensuring a qualitative improvement in the socio-

economic component is the most urgent (Economic,

2020), (Yuval, 2020).

2 RESEARCH METHODOLOGY

Using various information sources, the author made

an attempt to analyze the events that appeared as a

result of the impact of the pandemic and its

consequences on the processes occurring at the global

level in the social and economic spheres of public life.

When analyzing the current situation, a set of

methods of practical analysis was used, including the

analysis of statistical data, forecast estimates of

changes in the GDP growth rate, as well as

macroeconomic modeling of the possible

consequences of the coronavirus pandemic on the

state and development of the world economy.

According to experts from the largest financial

agency Bloomberg Economics, the global economic

losses from the coronavirus pandemic in 2020

amounted to about $ 5 trillion, which confirms the

fact that the national economies of most countries of

the world have experienced the deepest crisis since

the Great Depression, and, by forecasts, countries will

be able to return to pre-crisis indicators no earlier than

in 2022 (Gordeev, 2020).

The consequences for the world economy,

according to UN experts, turned out to be more

significant than from the crisis of 2008-2009. Thus,

the level of global GDP decreased by 4.3% compared

to the “pre-pandemic” period (The UN, 2020). The

situation is complicated by the slow pace of

vaccination. For example, it cost European countries

90 billion euros in additional costs in 2021 alone

(Europe, 2021). The report of the United Nations

Conference on Trade and Development (UNCTAD),

released at the end of November 2020, warns that the

crisis will significantly exacerbate the situation of

social inequality in society (Trade and Development,

2020).

The authorities of many countries have tried to

provide massive financial support to legal entities and

individuals. In total, since March 2020, according to

some estimates, about $ 12 trillion has been spent for

these purposes (Veselovsky, 2021). However,

government financial and social support provided in

most of the countries affected by COVID-19 did not

prevent the global economic crisis caused by

restrictions on business and travel, disruption to

supply chains, and a number of other factors

(Prospects, 2021), (Country policy, 2021).

A comparative analysis of published studies

showed that “even before the COVID-19 pandemic,

the world economy was ready for a recession: stock

markets overheated, economic growth in developed

countries slowed down, and D. Trump's aggressive

protectionist policies contributed to the destruction of

global supply chains and increased global risks.

Already in the second half of 2019, it became obvious

that the world economy was gradually entering

another recession, demonstrating slow economic

growth, but there was a widespread expectation that

in 2020 the situation would improve at the expense of

large developing economies, and by 2021 there would

be a return to global growth. Such sentiments

postponed the structural reform of many national

economies. The IMF has published a forecast for

global GDP growth in 2020 at 2.7%. Now all

forecasts are being adjusted downward (in particular,

the forecast of the World Bank given below in Table

1)” (Smirnov, 2020).

Table 1 presents the forecast data of GDP growth

for the key economies of the world, compiled by the

World Bank.

Forecast data in Table 1 show that the highest

GDP growth rates are expected from China, India and

the United States. According to the World Bank, the

growth drivers of the global economy in 2021 will be

deferred demand in China and large-scale cash

injections into the US economy. But many

RTCOV 2021 - II International Scientiﬁc and Practical Conference " COVID-19: Implementation of the Sustainable Development Goals

(RTCOV )

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developing countries will not be able to compensate

for the decline in their incomes.

Table 1: Real GDP (World Bank forecast) for 2021-2023, %.

Region /

country

2020

(fact)

Forecast

2021 2022 2023

The whole

world

-3.5 5.6 4.3 3.1

USA -3.5 6.8 4.2 2.3

Eurozone -6.6 4.2 4.4 2.4

an -4.7 2.9 2.6 1.0

China 2.3 8.5 5.4 5.3

India -7.3 8.3 7.5 6.5

Russia -3.0 3.2 3.2 2.3

Turke

1.8 5.0 4.5 4.5

Brazil -4.1 4.5 2.5 2.3

entina -9.9 6.4 1.7 1.9

Saudi Arabia -4.1 2.4 3.3 3.2

Source: World Bank data (https://www.rbc.ru/

economics).

We can observe a similar situation below in Fig.

1, as in the conditions of the global financial and

economic crisis of 2008-2009, developed economies

suffer the greatest losses, the drop in real GDP of

which will be 6.5%, and for an economy with

transformational markets – 2.4% (Lysenko,

Mechnikova, 2020).

Figure 1: World real GDP growth rates.

Based on the above and taking into account the

increase in the rate of recessionary processes in the

global economy, we can assume a further

deterioration in the forecast scenarios of the economic

and social situation. At the same time, it has been

proven that timely effective measures of anti-crisis

policy can reduce the depth of crisis processes and

minimize negative socio-economic consequences for

society (Lysenko and Mechnikova, 2020).

3 RESEARCH RESULTS

The COVID-19 pandemic, which swept through all

countries in 2020, clearly demonstrated to humanity

that it is not completely immune to global cataclysms.

Experts believe that the huge number of victims,

significant economic losses associated with the global

slowdown in economic activity as a result of the

introduction of strict restrictive measures aimed at

preventing an increase in the number of diseases, self-

isolation and the transfer of activities online indicate

that the world will truly never be the same.

Today we are witnessing how in the short-term

period of a pandemic, the national economies of most

countries of the world suffer enormous economic

damage, trying to support business and citizens in a

stable position by all available means.

As a result of the coronavirus pandemic, there is a

previously unknown intense combined negative

supply and demand shock with a negative impact on

production. Analysts estimate that such double

shocks will lead to multiple domino effects. For

example, companies with a high level of fixed costs

are threatened with bankruptcy, as a result of which

the banks that lend to these companies will also

experience serious difficulties with the return of

funds, which will lead to a possible banking crisis

(Smirnov, 2020), (Economics, 2020).

Analysis of the special literature allows

systematizing and highlighting the key factors that

have a devastating effect on the state of the world

economy (see Table 2).

Thus, we see that the consequences of the

coronavirus pandemic have gone beyond the purely

medical and biological perception of this

phenomenon and are increasingly acquiring

economic and social changes based on the following

facts presented in Table 3.

Thus, I would like to note that the COVID-19

pandemic has become only a phenomenon that has

exposed the accumulated problems in the world

community. In the economic sphere, COVID-19 has

transformed into a coronavirus recession, in the social

sphere it has shown problems of poverty and social

justice, which have long been “pushed” into the

background under the pretext of the priority of market

mechanisms in the distribution of the social product.

The pandemic has demonstrated that the basis for

overcoming the crisis will be a community of

sovereign interests, and that the object of anti-crisis

measures is not “rallying efforts to jointly resist the

crisis”, but saving the national economy in order to

ensure the social well-being of the population

(Shcherbakov, 2021).

Developed economies

Economy with transformational markets

Global economy

New Socio-economic Picture of the World: Consequences and Challenges of Coronavirus

375

Table 2: Key factors of the consequences of the pandemic on the state of the world economy.

Key factors of

the pandemic

conse

uences

Characteristic features of the consequences of the pandemic on the state of the world economy

On the

demand side

The consequence of the pandemic is a huge reduction in employment of the population, especially in

the sectors of the sphere of consumer services and a number of sectors of the production of goods. The

consequence of a huge reduction in employment is a reduction in the income of the population due to

the lack of income from enterprises for the sale of products or the possibility of obtaining loans. A

decrease in the population's income affects a decrease in consumer demand and the volume of

production of consumer goods and market services, which will lead to a reduction in production even

after the abolition or reduction of the re

ime of self-isolation and

uarantine.

On the supply

side

Due to the regime of self-isolation and quarantine, entire sectors of the economy are sharply reducing

the volume of production, up to almost completely stopping it. This applies, first of all, to the sphere

of consumer market services: public catering and retail trade in non-food products, domestic and

foreign tourism, urban and intercity passenger transport, hotel industry, and other consumer services.

In developed countries, these industries currently account for more than 50% of GDP.

On the

financial

stability side

The difficult financial situation of most commercial enterprises should inevitably lead to an increase

in non-payments to credit institutions and a drop in the volume of loans provided by them, which puts

them in a critical situation. The same applies to physical depositors and borrowers. All this without

taking into account the government's measures to support the economy.

To mitigate the economic consequences of the pandemic, developed countries resorted to

unprecedented measures to support the economy by increasing public debt, which requires an increase

in taxation of individuals and legal entities and a reduction in costs, mainly the largest ones – social

services. Obviousl

, this is associated with a hu

e reduction in the real income of the

ulation.

Source: compiled by the author.

Table 3: Impact of socio-economic changes on the world economy.

Key changes Features of the impact on the world econom

1. Economic changes

1.1. Coronavirus pandemic triggered

another global economic crisis

The COVID-19 pandemic has become a catalyst for powerful processes of socio-

economic transformation that occur every 7-10 years, precipitating another global

economic crisis.

Already in the 1st quarter of 2020, almost all national economies showed negative

growth. According to the UN, in 2020, the decline in the world economy was 4.3%

compared to the world economic crisis of 2008-2009, when the global GDP

reduced b

1.7%.

1.2. A noticeable feature of the

pandemic was the speed and scale of

the crisis coverage of the main

participants in the world economy

Given the synchronicity of countries entering a recession (Q1 2020), as well as the

speed of this process, it is difficult to determine which country's economic

problems have turned into a global trend. For this reason, only China, where an

outbreak of a new coronavirus infection was recorded, can be identified as the

source of the crisis or the countr

of the “first wave”.

1.3. The world economy is in the

process of forming a new configura-

tion of centers of economic growth

against the backdrop of the growing

economy of China and a number of

other ra

idl

develo

economies

Nowadays, there is an emergence of new and strong participants in the world

market, such as China, India, South Korea, etc., where economic processes in

terms of the main macroeconomic indicators (share in world production, labor

supply, positive GDP dynamics, etc.) will in a certain way affect the development

of the world economy, gradually changing the existing ideas about the centers of

influence in the modern economic s

stem.

1.4. Impact of the coronavirus

pandemic may have a longer lasting

impact on economic activity than is

commonly believed

There is a possibility that the global economic crisis caused by the COVID-19

pandemic could end quickly thanks to active containment measures. However,

historical data show that long-term economic consequences can persist for a

generation or more, which logically fits into the basic provisions of N.D.

Kondratyev’s long cycle theory.

2. Institutional shifts

2.1. The spread of the COVID-19

virus and the measures taken by

national governments to control it did

not live up to the main principle of

the develo

ment of the world

The globalization of the world economy, according to its supporters, makes it

possible to consolidate the efforts of the world community in the face of threats

and challenges, including epidemics and pandemics. However, nothing of the kind

happened: at the very beginning of the spread of COVID-19 between the countries

of the Atlantic Alliance

(

USA - Western Euro

)

, there was a com

lete

RTCOV 2021 - II International Scientiﬁc and Practical Conference " COVID-19: Implementation of the Sustainable Development Goals

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376

economy - the principle of

globalization

contradiction in the measures taken to protect and control the new coronavirus

infection, and the European Union, as a supranational entity, “isolated itself” from

the problems of its members by giving way to anti-epidemiological actions by the

national authorities.

2.2. In the context of the fight against

the pandemic, the authority of the

national authorities is noticeably

strengthening

Every government is faced with difficult choices: what restrictions to impose and

when to weaken them, where the money will be spent and how it will be collected,

what national interests may be limited in favor of international cooperation, etc.

This process can be accompanied by miscalculations and abuses. In such cases, the

main accused may be the socio-economic system as a whole, which has shown its

inability to guarantee socio-economic stability for the majority of citizens

(

Shcherbakov, 2021

)

2.3. State anti-epidemic measures

have led to “restrictive measures that

have no precedents in modern human

history” or “the total curtailment of

basic rights and freedoms”, meaning,

first of all, the compulsion to a

quarantine regime and restriction of

the movement of citizens

(Shcherbakov, 2021)

Of course, the quarantine, self-isolation, and permissive system of movement of

citizens introduced all over the world are measures that directly affect the quality

of the business environment. They are applicable only in extreme circumstances,

which undoubtedly include the danger of the global spread of COVID-19.

However, it is important that the state for the first time put the epidemiological

safety of society and citizens above the interests of the economy and business.

3. Social changes

3.1. All over the world, against the

backdrop of the economic crisis

caused by the pandemic, the process

of social inequality in society has

exacerbated, fraught with increased

social tension.

According to the UN, "the pandemic has increased inequality - there are 131

million more people living in poverty in the world." Poverty hinders the successful

development of the individual, determines the limited access to development

resources: high-paying jobs, high-quality education and health services, the

possibility of successful socialization of children and youth. The low income level

of a significant part of the population, combined with an excessive polarization of

income, causes a social rift in society, causes social tension, and forms crisis

rocesses in the domestic political sphere.

3.2. As a measure to support citizens,

the national governments of the

countries used “helicopter money”

So, in the United States in March 2020, as a measure to stimulate the economy and

social support for the population in the context of the COVID-19 pandemic, there

were direct payments of $ 1.2 thousand for adult citizens (with an annual income

of u

to $ 75 thousand

)

and $ 0.5 thousan

for each child

(

Shcherbakov, 2021

)

Source: compiled by the author.

4 DISCUSSION OF THE

RESULTS

During the lockdown, the world's most developed

countries experienced their deepest recession in

recent years. Nevertheless, financial panic was

averted. Banks have remained surprisingly resilient.

This is partly a consequence of the post-global

financial crisis regulation: if policies were carried out

in accordance with the same principles as in 2008,

banks could fail. But huge fiscal stimulus,

government loan guarantees, and central bank action

have prevented many losses from crystallizing. The

Federal Reserve has entered the treasury and

corporate bond markets, reflecting the growing

importance of capital markets as a source of credit.

The global economic recovery has been uneven.

Among the major economies, only China is showing

positive growth rates in 2020. US economic

performance outperformed forecasts thanks to

generous stimulus packages and a flexible labor

market. In other words, the US economy is likely to

be able to avoid a crisis similar to those experienced

during previous recessions. Meanwhile, many

developing countries have fewer financial resources

to avert a prolonged economic downturn.

It should be noted that the Russian economy,

along with the United States and China, will reach a

pre-pandemic level in 2021. At the same time, it is

expected that after a rapid recovery in 2021–2022,

Russian GDP is likely to return to pre-crisis growth

rates of around 2% if measures are taken to provide

socio-economic and financial support to individual

sectors of the economy and institutional units. Now

the most vulnerable to economic shocks are

households, small and medium-sized enterprises, and

the financial sector of the economy, in respect of

which a wide range of government regulators and

incentives should be applied (Lysenko and

Mechnikova, 2020).

However, regardless of country or region of the

world, a pandemic will shape economic prospects for

New Socio-economic Picture of the World: Consequences and Challenges of Coronavirus

377

years to come. The national governments of the

countries faced huge budget deficits and the burden

of public debt. As in the past decade, inflation rates

remain low, but some economists fear that fiscal

stimulus and demographic trends could trigger further

inflation.

However, the pandemic has had some positive

economic impact, since it has encouraged companies

to adopt new technologies and processes that can

improve productivity and economic growth in the

long term. However, leveraging new private sector

investment in innovative technology and know-how

requires governments to ensure a rapid recovery in

demand, additional investment in public goods, such

as broadband, and a focus on addressing the

educational failure that plagues many students today

due to school closures and transition to online

education.

In finance, COVID-19 has accelerated

digitalization, shifting payments and banking from

the physical to the virtual sphere. The growing

financial clout of tech-savvy millennials could

accelerate digital transformation. With the growth of

the financial technology market share, more attention

has been paid to this area. Many central banks have

begun to seriously consider launching their own

digital currencies. In the fall of 2020, the Central

Bank of Russia issued a draft digital ruble, which will

represent an additional form of the national currency

of Russia, issued by the Central Bank of the Russian

Federation in digital form. It is planned that the digital

ruble will become available to all economic entities

and will combine the properties of both cash and non-

cash rubles. On the one hand, like non-cash money,

the digital ruble can be used for remote payments and

online payments. On the other hand, the digital ruble

can also be used offline, like cash. Like cash and non-

cash rubles, the digital ruble will combine all three

functions of money: a means of payment, a measure

of value, and a store of value.

Today we are witnessing a unique phenomenon

when the coronavirus pandemic is completely

changing the world. Much is being transferred into

the format of Internet service and remote

communication. Coronacrisis creates new

professions and forms of activity. Remote work, or

“work from home”, is becoming the new norm for the

work of government, educational and cultural

institutions. Many museums are already actively

introducing lecture cycles (in online format) and

virtual on-line tours.

In this regard, we can confidently say that the

pandemic is shaping a new world – the world of

virtual and remote communication, which means new

types of activities and needs of humanity (Maslakova-

Klauberg, 2020).

5 CONCLUSIONS

Summing up the results of the study, it should be

emphasized that the scale and depth of changes

transforming socio-economic processes in the world

indicate the long-term nature of the consequences of

the COVID-19 pandemic in the development of the

global economic system. In the newly emerging

conditions, it is important for national governments

and international institutions to quickly and

efficiently respond to the global challenges and

threats that the modern world faces.

Until the public has a better understanding of

when and how the public health crisis caused by

COVID-19 will be resolved, economists cannot

predict the end of the recession that is currently

ongoing. At the very least, the socio-economic

uncertainty about how people and politicians will

behave in the near future is as significant as the

uncertainty surrounding the coronavirus. The results

of numerous studies prove that people are

successfully adapting to the current situation against

the background of universal vaccination, and that

many new directions in social development will be

relevant even after quarantine measures.

It should be noted that the world will no longer be

the same as it was before the coronavirus pandemic,

which, in turn, has become a powerful stimulus for

creating new horizons and prospects for the formation

of a new world order of the 21st century.

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