Since 2020, the world has seen two crises that have had a massive impact on the global economy. First, as the coronavirus (COVID-19) started spreading that year, companies and stores around the world were forced to shut down, resulting in a global economic downturn. Then, as the economy was slowly starting to recover from the effects of COVID-19, Russia's President Vladimir Putin decided to invade Ukraine in February 2022, which resulted in rising inflation. At first there were fears of a global recession, but as of January 2024, it seems that most countries have fared better than first feared, and consumer confidence has bee increasing since November 2022. However, Hamas' attack on Israel in October 2023 and the resulting war in Gaza has further spurred global uncertainties, and attacks by the Houthi militia based in Yemen on ships travelling through the Red Sea has disrupted international trade routes.
Global economy can be defined as the sum of activities that take place both within a country and between different countries. Each country is a separate unit, with its own industrial production, labor market, financial market, resources and environment. The globalization enabled and enhanced the development of international trade, finance, and migration of labor, where countries need to find common solutions and cooperate with one another. One of the effects of the globalization is that drastic changes in one country influence other countries. As a result, the COVID-19 pandemic and the Russia-Ukraine war have effected the whole global economy.
The rise of China
There are numerous indicators which allow to measure and analyze economic activity, in short economic indicators. One of the most important economic measures is gross domestic product (GDP), which is the total value of all goods and services manufactured within one year. Despite a downturn in 2020 following the COVID-19 pandemic, global GDP increased over the past decades, and is expected to continue to increase over the coming years. The United States was the country with the largest gross domestic product in 2022, followed by China, Japan, and Germany. These economies are expected to remain the dominant ones over the next years, but some of the highest growth rates are found in countries in the Global South. China's economic development is one of the most notable changes in the global economy over the past decades. The Asian country has gone from being a developing country to becoming the world's second largest economy and the world's leading exporter. This development has had a massive impact on the global economy and world politics, with an increasing diplomatic crisis between China and the United States.
Unemployment and rising inflation
In 2022, about 205 million people were unemployed worldwide, which was less than the two previous years. The world region with the highest unemployment rate in 2021 was the Arab World. Some countries, such as Japan, South Korea, Germany, and Italy, are struggling with ageing populations, meaning that the share of the population in working age is decreasing. As a result, worker shortage can be an issue in these countries in the future, with some of them relying increasingly on migrant workers.
A a result of the Russian invasion of Ukraine, prices of goods and services increased rapidly through 2022, and continued to do so in 2023. The global inflation rate was estimated to have reached nearly nine percent in 2022, and nearly seven in 2023. However, inflation rates fell in most major world economies through 2023, even though they remained unusually high in some. In 2022, the price levels increased most significantly in Venezuela and Zimbabwe, while the lowest inflation rates were reported in South Sudan and Macao.
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