A recent economist.com report discusses how the economy is going to have to survive the Covid-19 pandemic while only being 90 per cent functional once countries begin to lift lockdowns. And while 90 per cent actually sounds promising, encouraging even, it’s just not enough.
According to the report on April 30, a good example of this is China, which has slowly reopened some two months after the lockdown. However, its movement is nowhere near where it used to be. Travel, hotel bookings, flights, even the metro has felt the immense loss of business and, because of this, bankruptcy is on the rise, as is unemployment.
And it isn’t only China that will suffer the consequences of the backlash of Covid-19. The report explains that should America’s GDP (gross domestic product) alone plunge just 10 per cent, it would only come in second to what happened during the Second World War. In fact, it also states that until a vaccine is found, or some sort of treatment can be used, no easing of lockdowns is going to turn the economy of any country around.
Even when the lockdowns in other places around the globe slowly lift, no one is assured that things will go back to normal. Even with the easing of quarantines, the virus can still be fatal for as long as there is no cure or vaccine.
Secondly, just because lockdowns are eased, citizens all over the globe will still be fearful of going out. According to the report, 30 per cent of Americans won’t feel comfortable visiting the malls. While in Germany, which has already been opening up shops, it has not had any customers come into the shops anyway. Meanwhile, citizens from Denmark and Sweden are choosing to spend their money on essentials rather than things like travel or entertainment.
And it isn’t just households that will go through immense changes. A number of businesses are already short of money, having earned nothing throughout this time of lockdown.
The report mentions a Goldman Sachs survey which showed that small businesses will not have any cash left in less than three months. Britain, on the other hand, has seen a rise in at least 30 per cent of commercial tenants that are late in their rent.
Boeing, meanwhile, shared that travel will take two or three years to even come close to its 2019 sales.
Even investments, which are said to account for at least one-fourth of the GDP in the US, are hurting. This is mostly due to lack of money as well as the fear of risk since the stock market is suffering as well.
Americans also share their worry over losing their jobs, which is their main source of income, forcing them to touch their savings and possibly even sell their assets, or worse yet, borrow money, but these would sustain them for no more than three months.
Countries also worry about higher rates of jobless individuals, as well as difficulty for many to find “casual work” to keep them afloat.
An example of this is in Europe where at least 30 million people in the labour force are already using special schemes where the government pays their wages. But how the state can continue doing this, and for how long, is unknown.
And what choice do economies have but to find a way to survive? Countries will need to deal with the after-effects of Covid-19 whether they like it or not. While this isn’t the first time that the world has had to deal with a pandemic, what with the Spanish Flu and Sars, admittedly, there hasn’t been one that has had such a negative effect on the economy as this one.
The report mentioned that the people’s expectations have grown exponentially than how they were back in 1918, making it harder for each individual government to please its citizens.
So what, one might ask, is the solution to all of this? If things continue in the same downward spiral that they seem to be going, then recession is just around the corner.
As is joblessness, higher death rates of the elderly due to lack of workers, as well as a blow to health care, and just a general lack of necessities in people’s day-to-day lives. All of which, the report states, will probably spur on a “demand for change”.
And maybe, just maybe, this pandemic will also bring a sense of camaraderie in people that will rally together in what the report claims as “a sense of national and global solidarity”. Maybe people will take heart in countries like Taiwan and Germany that have risen above this health crisis due to scientific expertise rather than just being a show of political coercion.
While surviving on a functional 90 per cent economy is better than being on complete lockdown, it will also bring out the inequalities of every country and their economies.
If they don’t want history to repeat itself, or worse, create even more chaos in an already suffering world, then governments need to work on solutions now before there is trouble in the streets. /TISG