How the Global Economy Should Respond to COVID-19?
With over 2.4 Million positive cases and more than 165,000 lives claimed within an alarmingly short period of time, the fact that COVID-19 has and is continuing to have a catastrophic impact on the lives and livelihoods of millions world over, is not an understatement.
On the 11th of March 2020, the World Health Organisation (WHO) characterised COVID-19 as a pandemic, sending multiple nations into weeks of lockdown and forcing global economic activities to come to a screeching halt. Markets, trade and supply chain activities have all been impacted alike.
In the recently published World Uncertainty Index by the IMF, which is compiled based on the number of times the word ‘uncertainty’ is associated with the terms ‘pandemic’ or ‘epidemic’ in the Economist Intelligence Unit (EIU) country reports, the Coronavirus is ranked on top with the most number of references to ‘uncertainty’.
In these uncertain times, there is one certainty. That is the days of business as usual are over as we know it and we have to adopt to a new normal. Post COVID-19, businesses will be operating in a different environment, marked with new challenges and opportunities.
As countries progressively work towards ending the lockdowns and resuming their respective economic activities, it is vital to do so with a clearly thought out plan. Further, the response should be coordinated within and across nations, to effectively manage the post-crisis economy.
We identify three main phases in contention requiring resources and focus from both public and state sectors.
- “Fix the Core” in the short-term: In 1-6 month the main focus should be to contain the virus and maintain essential services and supplies to the public. Factors such as testing and tracing abilities, capacity in the healthcare sector will be key in strengthening the core.
- “Improve the Economy” in medium-term; In 6-60 months, re-purpose the focus in rebuilding broken or hibernated sectors, taking account new normal. The new normal will be heavily shaped by the digital economy, new supply chain challenges and sustainability requirements affecting climate change and energy demands. We believe that it is pivotal to prioritise rebuilding efforts on firms associated with the real economy, which produces essential goods and services.
- “Change the game” in the long-term. The world will not return to the pre-COVID era immediately after the crisis. For many states and businesses, the belief that the world will return to what it was could be the catalyst of their downfall. It is too soon and too uncertain to predict what we will see in 5 years. However, we see common themes emerging in agriculture, communication, financial services and energy sectors highlighting the importance of agility and sustainability. Therefore, investing in game-changing innovation in the above sectors should be permitted and encouraged now, not later.
It needs to be noted that the three-pronged approach needs to be driven in parallel and should be formulated over the next 30-60 days as a matter of urgency and importance. As the steps are interlinked, failure on one link would have dire consequences for the other two.
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