Five Years Later: The Ongoing Economic Effects of COVID-19

As of March 2025, the ramifications of the COVID-19 pandemic continue to reverberate throughout the global economy, five years after the World Health Organization declared it a pandemic. The health crisis and the measures implemented to mitigate its spread not only led to unprecedented government borrowing but also significantly impacted labor markets and altered consumer behavior.

The increase in global government debt has been substantial, rising by 12 percentage points since 2020, particularly pronounced in emerging markets. The pandemic has also ignited inflationary pressures, which became a pivotal issue during the 2024 U.S. elections. This inflation surge, driven by post-lockdown consumer spending, government stimulus efforts, and labor shortages, peaked in many nations in 2022. In response, central banks globally raised interest rates, though the magnitude of these increases varied significantly.

Moreover, sovereign credit ratings have declined, reflecting concerns about a country's debt repayment capabilities. According to Fitch Ratings, the average global sovereign credit score is approximately a quarter of a notch lower than it was at the pandemic's onset, with emerging markets experiencing an even steeper decline. Lower credit ratings typically result in increased borrowing costs on international markets.

The pandemic's impact on employment has been profound, with millions of jobs lost, disproportionately affecting lower-income households and women, as indicated by the World Bank. While employment levels have rebounded since the easing of lockdowns, the recovery has been concentrated in sectors like hospitality and logistics, reflecting changes in consumer habits towards online retail.

In particular, the participation of women in the workforce saw a notable decline in 2020, largely due to their representation in sectors that were severely impacted and the additional caregiving responsibilities that arose during school closures. However, recent data suggests a slight narrowing of the gender employment gap.

Travel and leisure patterns have also transformed, with a noticeable shift towards remote work reducing daily commutes in major urban centers. In London, for instance, public transport usage remains down by nearly a million journeys per day compared to pre-pandemic levels. The airline industry, one of the sectors most adversely affected by the pandemic, reported losses totaling $175 billion in 2020. However, with the rollout of vaccination programs and the subsequent easing of travel restrictions, IATA forecasts a net profit of $36.6 billion for the airline sector in 2025, anticipating a record 5.2 billion passengers.

Despite this recovery, travelers are facing hotel prices that have surged past inflation rates, remaining higher than 2019 levels in various regions. Oceania experienced the most significant price increases in the first half of 2023, followed by North America, Latin America, and Europe. Projections indicate that global hotel prices are unlikely to revert to pre-pandemic standards.

Additionally, many countries are experiencing record-high office vacancy rates, a direct consequence of the shift towards remote and flexible work arrangements. In the U.S., central business districts have observed the most significant increases in office vacancies, a trend that persists into 2025.

The pandemic also catalyzed new consumer behaviors, particularly the acceleration of online shopping. This shift has stabilized after initial surges, with analysts noting that the rise in online sales in Europe is accompanied by an increase in physical retail space as businesses adapt to integrate both online and offline sales strategies.

While some digital and delivery companies that thrived during the pandemic have seen a decline in market interest, others have established enduring benefits from the digital transition. Despite past market fluctuations, the value of Bitcoin has surged significantly since December 2019, reflecting a broader search for investment opportunities amidst volatility.

As individuals adapted to life during lockdowns, many also began to invest more in the stock market, with retail investors accounting for roughly 27% of total U.S. equity trading by December 2020. This trend led to the acquisition of major trading platforms, such as TD Ameritrade by Charles Schwab, and the rise of platforms like Robinhood, which gained popularity during the retail trading surge of 2021.