COVID-19 injecting uncertainty into a shaky world economy
Last week the world reached a tipping point. Twelve countries, representing 50% of the world’s GDP, shifted into suppression or lockdown (Figure 1) to limit the spread of COVID-19. Many industries will be affected, but some will just be disrupted. Those that act fast enough can help support citizens through this crisis — and will be stronger for it in the long term.
Figure 1. How the 20 largest economies shifted from first infection to full lockdown
We don’t know yet how big the economic toll will be on each of these countries, or globally. China (which is the first major economy to lift restrictions) could see its economic growth fall by 23%, according to some forecasts. That is big considering the country managed to limit its cases to 81,000 — an insignificant proportion of their 1.38 billion population.
The concern is that other major economies have not reacted as fast, or with as much authority, and that they may suffer even deeper economic impacts. Governments are racing to release fiscal stimulus packages. The financial markets in response, are either falling or becoming extremely volatile (Figure 2).
Figure 2. While governments spend, market confusion reigns
It’s far too early to predict the medium or long-term effects. However, there is no denying that travel, hospitality, public events and venues are the first in line to take a direct financial hit. Meanwhile, retail, logistics, education, manufacturing, healthcare, media, telecoms, and insurance are facing significant changes in demand dynamics that present new opportunities but could also overwhelm them. Further down the road, however, it is the property and mortgage markets, as well as general financial institutions, that are going to face a longer-term challenge as employment falls and defaults start rising.
For those where demand is shifting rather than decreasing, timely action will determine their ability to weather this storm. For these industries, COVID-19 will bring disruption that could accelerate digitization and re-shape their business models.
Healthcare providers obviously have to deal immediately with a massive spike in demand. But healthcare organizations and policymakers will also have to rapidly ramp up their use of data analytics to track their progress and prioritize their short-term investments. Longer term, more connected and real-time data on health conditions will become necessary.
Retailers will now have to be digital first, as consumers’ physical store visits will be restricted and online deliveries encouraged by governments. Those that use data effectively to predict and manage demand will be in a better place to cope — now and in the future.
Manufacturing firms will need to increase production of items that are in high demand like personal protective equipment and healthcare technologies. If retooling factories is too burdensome, a lack of demand could collapse some of these firms.
Supply chains are going to have to do many about turns in order to re-balance inventories and orders. Logistics firms are currently well connected through various supply chain mechanisms — yet much of their handovers are still manual, and tracking provenance and quality is a challenge. In a hyper-sensitive pandemic situation, those that can ensure their goods are untainted will add the most value.
Online education is already becoming a ubiquitous replacement for millions of primary and secondary students globally. It will boost the nascent e-learning market, while also make us value physical learning in a different way. In fact, it may disrupt the e-learning market more than it does traditional schools. Now some of the best teachers in the world will be able to reach classrooms of millions instead of dozens or hundreds.
The media industry is already under pressure. As people stay at home, demand and consumption for content is soaring. Yet many production companies have shut down filming due to the pandemic. The advertising market remains though. In fact, it could help bring more eyeballs back to broadcast from online. Some are finding new content. For example, ESPN2 will carry marble races and other alternative sports through YouTube licensing acquisitions.
Meanwhile, Netflix and YouTube are purposefully limiting their speeds in Europe as bandwidth demand spikes for residential users. Telecom companies are now going to have to sustain peak volumes, and home broadband becomes a much more critical function as whole populations begin to rely on it for work.
It would be trite to say that the ramifications of the COVID-19 pandemic will be far reaching. Whether the lockdowns are short-lived, or run on into the next year, the global nature of this crisis clearly marks this as a pivotal moment that will fundamentally affect social, business and governmental thinking.
For many, COVID-19 is a warning to humanity about our fragile and tenuous control over the world around us. From an industry and economic viewpoint, technology can win back some of this control through techniques that connect, monitor, analyze and automate our ever more complex interrelationships.