Chronic. Two years after the beginning of the Pandemic of Covid-19, one might think that its economic effects have disappeared in OECD countries: at the end of 2021, the gross domestic product (GDP) and employment exceed their level of the end of 2019; The financial situation of companies (profits, net debt) is better; World trade is at a much higher level than before CVIV-19. Despite this apparent normalization and the possible effects of the conflict in Ukraine, the 2020-2021 health crisis left deep traces, and the future economic trajectory of OECD countries will be strongly affected.
The first lasting effect of the health crisis is the sharp rise in public debt rates. This rate increased in the OECD by 116% of GDP by the end of 2019 to 136% at the end of 2021. This very high level will strongly force economic policies in the future.
To ensure the solvency of public debts and states, it will be necessary to move to significantly more restrictive fiscal policies, which will be heavy consequences when many public spending new (health, training, innovation, energy transition, Reindustrialization …) are necessary, either maintaining very expansionist monetary policies with very low interest rates, whatever, elsewhere, the economic situation.
The second effect is the very strong rise in the amount of money. Central banks have monitored the public deficits (they have issued state obligations as counterparty of monetary creation) to make them financing, and have massively increased the central bank currency offer: $ 13,500 billion. (€ 12,187 billion) at the end of 2019 to $ 23 billion at the end of 2021, for the entire OECD.
Households and companies thus have an abnormally high amount of money, and this has triggered a portfolio rebalancing mechanism: economic agents use this excess money to buy shares and real estate – hence the Strong rise in stock indexes and real estate prices (+ 12% over one year for real estate prices in 2021, + 30% over one year for shares). This sharp rise in the amount of currency therefore dives sustainably the OECD countries in a bubble saving.
More property, fewer services
The third sustainable effect is the very strong deformation of the demand structure, in favor of the goods and at the expense of services. Since the beginning of 2019, the consumption of OECD households has increased by 17%, while the consumption of services has dropped by 1%. This sharp rise in the demand for property results from various factors: teleworking (computer equipment, home equipment), business digitization, online commerce (which facilitates the purchase of goods), the transition energy (which requires a lot of material). It results in a sharp rise in demand for raw materials, semiconductors, transport, more necessary for the production of goods than that of services. Hence the rise, some of which will be sustainable, energy, metal, electronics, maritime and air freight.
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