Rising Debt, Inflation, and Interest Rate Challenges due to COVID-19
Five years after the World Health Organization declared COVID-19 a pandemic, its economic impact is still felt worldwide. Governments borrowed heavily to support welfare and livelihoods, leading to a 12% increase in global government debt since 2020. Emerging markets saw even steeper rises, putting pressure on national finances.
The pandemic also triggered inflation spikes, worsened by post-lockdown consumer spending, labour shortages, and supply chain disruptions. Inflation became a key concern in the 2024 US elections. In response, central banks raised interest rates at varying levels to control rising prices.
Sovereign credit ratings fell as economies struggled under the weight of debt. Data from Fitch Ratings shows that global credit scores remain lower than pre-pandemic levels. This decline is even more pronounced in emerging markets, making borrowing more expensive for these nations.
Labour Market and Travel Industry Shifts
The pandemic led to millions of job losses, disproportionately affecting poorer households and women. Employment gradually recovered, but the demand shifted towards logistics and hospitality due to the rise of retail delivery services. Women’s workforce participation initially dropped in 2020 but has since improved, slightly narrowing the gender employment gap.
Travel habits have also changed. While people now travel and dine out as frequently as they did in 2019, remote work has significantly reduced commuting in major cities. In London, public transport use remains about one million journeys below pre-pandemic levels.
The airline industry, among the hardest hit, recorded losses of $175 billion in 2020. However, vaccination campaigns helped revive travel demand. For 2025, the International Air Transport Association (IATA) projects a record 5.2 billion passengers and an industry-wide net profit of $36.6 billion.
Despite the recovery, hotel prices remain significantly higher than 2019 levels, with regions like Oceania, North America, and Europe experiencing the sharpest increases. Office vacancy rates have also surged due to the rise of remote and flexible work, with central business districts in the US witnessing the highest vacancy growth.
The Digital Shift and Investment Trends
The pandemic accelerated digital adoption, with online shopping surging during lockdowns. Although e-commerce growth has since stabilised, European retailers are now expanding physical stores to support both online and offline sales.
Companies in digital services, delivery, and pharmaceuticals thrived during the pandemic. While some have lost their appeal, others continue to benefit from digital market expansion.
Bitcoin, despite market fluctuations and the collapse of crypto exchange FTX, has surged by 1,233% since December 2019. The rise of retail investors was another major trend, with 27% of total US equity trading coming from individual investors by December 2020. Trading platforms like TD Ameritrade and Robinhood gained immense popularity, particularly for meme stock investments.
Even as the world moves past the initial shock of the pandemic, its economic impact remains deeply embedded in global markets, labour trends, and financial systems.
With inputs from Reuters