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The potential second wave of Covd-19 

and the effect on the global economy   

September 2020


With decline in the number of daily Covid-19 cases across Europe, Asia and in parts of U.S. over the summer, there was a feeling among many that the pandemic was coming to an end. However, as countries cautiously relax lockdowns and social distancing measures, the potential for second wave of the pandemic has lingered as a palpable threat to a global recovery.

Global Economic Effects of Covid-19

Covid-19 has spread across 200 countries, including all the states of U.S., since the first cases in China were reported late in 2019. The negative impact of the pandemic on global economic growth is unlike any seen in nearly a century. It is so far estimated that global economic growth will decline by 3% to 6% in 2020 due to the coronavirus pandemic.


There is a chance of partial recovery, assuming there is no second wave. Regardless, levels of unemployment are unlike any seen since the Great Depression of the 1930s and the economic outcome of pandemic could lead to a global economic recession. Increased levels of poverty, disrupted careers, significant lifestyle changes and heightened social unrest have exacerbated the terrible loss of life to permanently affect global economic growth.


Global trade, which will depend on the extent and gravity of individual countries’ economic downturns, could fall by as much as 18%. Such a decrease will have a heavy economic toll on emerging and developing economies dependent on trade. However, the full impact of the pandemic on global economy is as yet unclear and will not be known for some time. 

Are we heading into ‘Second Wave’?

The recent surge in Covid-19 cases in some parts of the world, particularly in Italy and parts of the U.S., has led to fears of the beginning of a so-called “second wave”. However, some authorities maintain it is simply a continuation of the first wave.


The U.S., in particular, is still going through a “first wave” of Covid-19 infections. 

“You hear people saying, ‘We’re heading into a second wave,’ [but] it’s not,” Dr. Greg Poland, professor of medicine and infectious diseases at the Mayo Clinic in Rochester, Minnesota, founder and director of Mayo Vaccine Research Group, tells CNBC Make It. “It’s all part of this ongoing reservoir of infection in the U.S.”

However, such observations do not preclude a second wave of the virus. 

“In order for the first wave to be over, the number of positive Covid-19 infections would have to reach low single digits,” Dr. Anthony Fauci, White House advisor and director of the National Institute of Allergy and Infectious Diseases, told The Washington Post on June 18. (For instance, in New Zealand, before June 18, when two foreign travellers tested on arrival in Auckland, there was a phase of no infections for 24 days.) “When you get there, then you could feel you have a degree of good control so that when you do get a new infection, you can prevent that infection from becoming a resurgence of essentially many, many more.”

The Intensity of ‘Second Wave’

The World Health Organization (WHO) has warned that there is the potential for a second wave of coronavirus, probably during the upcoming Northern Hemisphere winter. A second wave of Covid-19 (peaking in November and December) could coincide with influenza season which might overwhelm the already fragile healthcare systems globally, with additional serious fallout. 

According to the WHO, the second wave will likely be more dangerous than the first. This is indeed what happened in the case of the Spanish Flu after the First World War, the second wave of which proved far more fatal than the first. In the case of COVID-19, European countries, India and Iran are expected to be hit hardest by a second wave.

Whether or not we see a comeback like this “is at least partially influenced by how well we all do at infection control measures, like distancing, mask-wearing and hand-washing,” Sexton says. “So, we may be able to affect change on how high that peak might be.” In reality, we will keep on witnessing ups and downs coronavirus infections depending on prevention measures adopted by people until we have an effective treatment or a vaccine, she says. 

Global Economic Growth amid Potential ‘Second Wave’

Economists argue that the flight of the pandemic very uncertain, which itself can shake the confidence of companies and governments to invest and grow.

The Organization for Economic Cooperation and Development (OECD) is of the view that if the second wave of infections happens, it would lead to drop of more than 7.5% in global GDP with around 40 million people losing their jobs.

In June 2020, OECD estimated that the second wave of coronavirus infections would trigger the return of lockdowns and the world economy would fall at least 7.6%, before climbing back 2.8% in 2021. European GFP is expected to plummet 11.5% in 2020 if a second wave of infection breaks out, while the GDP of the U.S. and Japan would fall by 8.5% and 7.3% respectively. 

Emerging economies such as Russia, Brazil and South Africa, will plunge by 10%, 9.1% and 8.3% respectively. China and India’s GDPs will be relatively less affected, with a decrease of only 3.7% and 7.3% respectively, in the case of second wave. 

Given the inherent current uncertainty, the economic situation remains highly fluid globally. Uncertainty surrounding the length and depth of health crisis-related economic effects continue to fuel perceptions of risk and volatility in financial markets and corporate decision-making. In addition, uncertainties concerning the global pandemic and the effectiveness of public policies intended to contain its spread and prevent a second wave of infections have added to market volatility.


In a growing number of cases, corporations are postponing investment decisions, laying off workers who previously had been furloughed and, in some cases, filing for bankruptcy. Compounding the economic situation has been a historic drop in the price of crude oil. While prices have recovered somewhat from the low of nearly $20 per barrel in April, they continue to hover around $40 to $45 per barrel, reflecting the decline in global economic activity while also contributing to it.



Based on historical precedent, a second wave of infections arriving in the coming northern hemisphere winter months may be more devastating than the first one. The global economy has already suffered huge losses in terms of GDP growth, unemployment and increases in the levels of poverty with millions of businesses closing down across the world.


While the current resurgence of Covid-19 cases in some countries may not qualify for the second wave, if a second wave were to hit, it would plunge the world into a further global economic recession. However, the rapidly evolving nature of the COVID-19 crisis creates a number of issues that make it difficult to estimate the full cost to global economic activity: uncertainties surrounding its duration, how workers might be affected and which and how many countries will be affected make any estimation of the peak of the pandemic’s effects extremely challenging to predict. 

About the author(s)


Harold Alby is a managing director and chief operating officer at Inova Capital. Justin Inniss is a managing director at Inova Capital.For more details on our insights please get in touch with us at Inova Capital AG on +41 415616905. Inquire about our ideas and nowcasting capabilities.

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