Skip to main content


COVID-19: What Now for Inflation and Globalisation?

The scramble for key health products in the wake of the pandemic has highlighted the reliance on global supply chains

The near worldwide COVID-19 lockdowns have highlighted our reliance on global supply chains. Will this change the extent to which the world has globalised over the past few decades? And if so, what does it mean for inflation?

In recent months, our lack of domestic production to meet the needs of society – especially amid a crisis – became plainly obvious. Governments and supermarkets battled to keep up with the crisis-induced demand for products such as ventilators, face masks and hand sanitiser.

An interconnected world – Globalisation has peaked1

An interconnected world – Globalisation has peaked

1 As at 31 December 2018.
2a Source: World Trade Organisation. Total trade flows in USD.
2b Source: World Trade Organisation. Cumulative trade coverage of import-restrictive measures in force in USD.

The sheer extent to which the world has become interconnected over the past 30 years through growing international trade is staggering. Three key factors contributed to this:

  • Rapidly evolving technology and global service provision
  • A growing global workforce, thanks to expanding populations and migration
  • Capital expenditure, led by industrialisation in China

While these elements worked in harmony for much of the 1990s and 2000s, the global financial crisis changed the dynamics in 2008. While technology use increased, a productivity gap emerged, consumers’ leverage shrank, and demographics turned in the developed world. At the same time, global business investment faded and China moved from rapid industrialisation to a consumption-led economy.

These structural changes have made for a shift to protectionism in a world of lower growth. All over the world, domestic politics favoured a prioritisation of domestic jobs and production.

Higher prices and internal focus

We cannot predict the future, but governments’ immediate reaction to the pandemic’s impact point to an acceleration of the de-globalisation trend. Much of the major fiscal stimulus measures that have been introduced include support to smaller businesses and the self-employed, servicing the needs of domestic consumers.

These elements point to higher inflation, but the structural factors driving deflation are not to be underestimated: technology is still unlocking capacity, there is still a surplus of natural resources and ageing workforces in developed economies. This is a long-term question that we will be analysing carefully as the recent interventions play out.

Who wins and who loses, individually and collectively, will become apparent as we see policy formation and consumer reactions to support domestic companies in times of crisis. It is another dimension of change that has been playing out for a decade one that requires forward-looking and imaginative thought in the way we manage your portfolio.



This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

Previous Article


What Will the World Look Like In a Year?
Next Article


ESG Integration in Action
Class I USD
ISIN LU0143563046
A high conviction global equity fund for which we seek to identify companies on the right side of change. The portfolio typically consists of typically 60-80 stocks representing our most compelling bottom-up growth ideas, often derived from technological innovation and secular disruption.
View More...
3YR Return
Fund Size


What Will the World Look Like In a Year?

What Will the World Look Like In a Year?

What Will the World Look Like In a Year?

Coronavirus has dramatically changed the way we live our lives in a very short space...

By Laurence Taylor

Laurence Taylor Portfolio Specialist

You are now leaving the T. Rowe Price website

T. Rowe Price is not responsible for the content of third party websites, including any performance data contained within them. Past performance cannot guarantee future results.