Connections Matter: The Pandemic, the Suez Canal, and the Global Economy

Adnan Zai

Historically, the forecast for the economic markets and how they would react were based on diplomatic relationships between countries. But if any lesson could be learned from the pandemic, it is that the world is more closely connected than ever before. Slight gains in the global economy seem to be a result of unemployment numbers improving slightly, more Covid-19 vaccines in play, and even something as random as a ship stuck in the Suez Canal.

Recent Global Trends

The world market has experienced some positive changes in the last few weeks, on the heels of the unemployment numbers and pandemic news. Reuters reported some small improvements this week.

  • The U.S. currency index has reached its highest mark since mid-November, up 2% this month.
  • Asian stocks were rebounding after hitting a 3-month low.
  • European stocks should open higher, with Euro Stoxx futures rising 0.8% and Britain’s FTSE futures gaining 0.61%.
  • Japan’s Nikkei rose 1.47% when Wall Street shares rallied as a result of cheap stocks battered by the pandemic.
  • The Dow Jones Industrial Average rose 0.62% and the S & P 500 gained 0.52%, though the Nasdaq Composite added just 0.12%.

While the global market is slightly rebounding, Chinese shares took a hit when the European Union joined Washington’s allies to impose sanctions in China’s Xinjiang region. This came because of allegations of human rights abuses.

So, what does the future hold for the world economy? The expectations for the future are basically a wash. According to the United Nations, “In 2020, world output shrank by 4.3 percent, over three times more than during the global financial crisis of 2009. The modest recovery of 4.7 percent, which is expected in 2021, would barely offset the losses sustained in 2020.”

Depending on the response to the pandemic, and other unforeseen events like the Suez Canal being blocked for days upon end, the market could move to the positive or the negative.

Vaccination Victories

There is no doubt that the vaccination program for the Covid-19 pandemic will affect the global economy. U.S. President Joe Biden announced in his first news conference that the original vaccination goal of 100 million shots would be doubled after it was reached 42 days early. Not every area of the globe has had as much success. In Europe, vaccinations are behind schedule.

And in other parts of the world, citizens and economies have experienced success to varying degrees. China seems to have gotten back on track relatively quickly, but some major developing countries like India and Brazil are still having difficulties with Covid-19 flare-ups. Depending on the trajectory of the variants of Covid-19 and the success of the vaccination programs, the global economy could change on a dime.

Big Impact of a Big Ship

Along with the pandemic, there are other arbitrary things that happened that can have a big effect on the global economy. For the past week, a ship from Panama has been stuck in the Suez Canal, affecting 9 billion dollars a day in global trade. Over 10% of the world’s trade, including a sizable portion of the world’s oil, was tied up for over a week, and the ripples will definitely be felt. This comes after the trade chain has already taken a big hit from the pandemic.

If officials had not freed the ship, the impact on the world economy could have been more profound. “The greatest impact would have been felt in the European market, which relies most on transfers through the canal. But given the interconnected nature of global manufacturing and commerce, there was likely to have been a knock-on effect for the United States,” reported NPR.

Although in days gone by, the global market fluctuated based on the interactions of countries today, there are many other factors at play. Whether a small virus or a giant ship, small events at first glance can have a big impact on the globe and its money.

Adnan Zai

Leave a Reply