HONG KONG • Just as some patients recovering from Covid-19 suffer long-lasting symptoms, it is becoming clear that the same will be true of the global economy.
While US$26 trillion (S$35 trillion) worth of crisis support and the arrival of vaccines have fuelled a faster recovery than many anticipated, the legacies of stunted education, the destruction of jobs, war-era levels of debt and widening inequalities between races, genders, generations and geographies will leave lasting scars, most of them in the poorest nations.
"It's very easy after a gruelling year or more to feel really relieved that things are back on track," said Assistant Professor Vellore Arthi of the University of California, Irvine, who has examined the long-term impact from past crises. "But a lot of the effects that we see historically are often for decades and are not easily addressed."
The decline in gross domestic product (GDP) last year was the biggest since the Great Depression. The International Labour Organisation estimates the Covid-19 crisis cost the equivalent of 255 million people their full-time jobs. The Pew Research Centre reckons the global middle class shrank for the first time since the 1990s.
The costs will fall unevenly. An Oxford Economics scorecard of 31 metrics across 162 nations highlighted the Philippines, Peru, Colombia and Spain as most vulnerable to long-term scarring. Australia, Japan, Norway, Germany and Switzerland were seen as best placed.
"The aftermath of Covid isn't going to reverse for a lot of countries. Far from it," said World Bank chief economist Carmen Reinhart.
The International Monetary Fund sees advanced economies less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more.
The World Bank warned in a January report of "a decade of global growth disappointments" unless corrective action is taken. It estimated global output was on course to be 5 per cent lower by 2025 than its pre-pandemic trend.
Experts, including Prof Arthi, say there need not be a lost decade if the right policy steps are taken, especially in the areas of reskilling workers and putting a floor under those hit hardest by the crisis.
One way out includes encouraging policies that create incentives for business to innovate and invest, particularly in climate change.
The right kind of policy mix could push the rebound towards a full recovery, according to Citigroup chief economist Catherine Mann.
"Innovation supports higher productivity growth, and new investment raises living standards," she said. "Key, too, are strategies to keep and train workers to take advantage of the higher productivity opportunities."
The Covid-19 crisis cost the equivalent of this number of people their full-time jobs, estimates the International Labour Organisation.
Countries that were quick to control the virus are sending warning flares about the uneven road ahead. After initially enjoying a V-shaped recovery, New Zealand's economy contracted in the final three months of last year as the absence of foreign tourists left a hole that locals could not fill. Now, the country faces the prospect of a double-dip recession.
In China, retail spending has lagged behind the broader recovery.
How consumer confidence and spending patterns are shaped by ongoing concerns could end up being one of the crisis' most important economic legacies.
"There's genuine uncertainty over how much people's behaviour in terms of consumption patterns changes as a result of this crisis," said Dr Adam Posen, president of the Peterson Institute for International Economics.
The crisis has accelerated the use of robots in the manufacturing and service industries as people need to be protected from the disease. While that is spurring hopes for a revival in productivity growth, millions of jobs will be threatened with a question mark over whether enough new ones will be created.
Over 100 million people in eight of the world's largest economies may need to switch occupation by 2030, according to McKinsey. Those most likely to suffer skill gaps are the less educated, women, ethnic minorities and the young.
"A lot of those jobs are gone forever," said Mr Eric Robertsen, Standard Chartered's global head of research.
Even where jobs are not lost, work patterns have shifted and it remains to be seen how those changes will impact wage packets.
Longer-term effects will also be evident in human capital after the pandemic locked out children from classrooms for as much as a year.
The Organisation for Economic Cooperation and Development (OECD) calculated last September that even a loss equal to a third of a year for students could curb a country's GDP over the remainder of the century.
Students in grades 1 to 12 may see 3 per cent lower income over their lifetimes, the OECD warned, with the poor or those from minority backgrounds hardest hit.
How to finance a full recovery will be complicated by the extra US$24 trillion in borrowing that the world took on last year, bringing total debt to a new high of US$281 trillion, according to the Institute of International Finance.
Even without a debt crisis, once interest rates start to rise, both governments and companies will come under pressure, according to Dr Mark Zandi, chief economist of Moody's Analytics.