What are the factors that can slow our recovery on economic front after COVID-19?
While the deathly COVID-19 may be caused due to coronavirus, but the rising number of positive cases and impending economic fallout are happening because of our mismanagement. While scientists are busy around the clock testing and experimenting with various compounds to find the cure and vaccine, we also need to understand how our behavior and economic measures can influence the speed and direction of the recovery curve.
While the epidemiology of Covid-19 is rapidly evolving, the surge in infections is generally due to human negligence and failure to follow the social protocols imposed by the WHO and local government. However, it is important to note that being a social animal, and depending on food resources to survive; it is difficult for anyone to stay locked in their homes. So let us rule it out as something which is beyond our control. Now, if one considers the financial aspects and mitigation strategies adopted, this is where we can see the loopholes.
Let us consider a scenario. Imagine a coastal area is about to receive updates about an approaching tropical storm (hurricane or cyclone). As soon as the locals are made aware through early warning systems, the residents are likely to evacuate to higher and safer areas, taking a few necessary items with them.
The government will also issue a high alert for the same, plan disaster management and mitigation, ration important supplies like food, medicines, flashlight, and so on. As a result, the number of casualties will be significantly reduced when proper planning and critical steps are enforced before the hurricane makes landfall and after too. But if one compares this scenario with COVID-19 preparedness, different nations adopted different strategies, and we notice the impact of those measures reflect in the form of the number of daily cases and the dip in GDP.
While most of the European and Asian nations have begun resuming the old lifestyle, lifted lockdowns, and are working to revive the gig economy, certain threats can hinder the growth. A KPMG report mentions that, in the case of the second wave of COVID-19, the GDP in Q3 and Q4 will be pushed further low. This will occur mainly as affected nations may require implementing another and stricter lockdown throwing economy on a severely deteriorating curve. KPMG warns that ‘recovery’ and ‘rebound’ state, may not imply pre-pandemic levels. In fact, it could take until the latter half of 2021 to return to 2019-Q4 levels. Apart from that, some countries and territories may fare worse than others. The economic fallout could be in double-digit with recoveries to 2019-Q4 levels not expected until 2024 or later.
Meanwhile, governments across the globe have to take immediate actions to accommodate employment to the people who lost their jobs and livelihood due to COVID-19 and then lockdown. In a survey by AppJobs carried in March, around 70 percent of gig workers then had no income, while 89 percent were looking for a new income source. Meanwhile gig economy suffered a major blow, it can also help in reviving the economy to an appreciable extent. It is mostly the large enterprises that struggle.
Companies like Accenture, Amazon, Ford Motor Co have either laid off several employees or are planning to in the near future. According to Warwick McKibbin of the Brookings Institution, “Even when a vaccine is devised, making it available worldwide on the necessary scale is going to take time.” “You have to get quite a lot of the population vaccinated before the economic costs start to come down,” he adds. As per his model, the coronavirus could cost the world economy some US$35 trillion through 2025.
Though the healthcare industry and cloud and software giants like Microsoft have cushioned the economic decline, it may be enough. The rich are getting richer while the poor are poorer, struggling to make ends meet. This time, even banks may not be able to help us survive the recession, which is feared to have started in few nations. As per a study by World Bank, every region is subject to substantial growth downgrades. East Asia and the Pacific will grow by a scant 0.5%. South Asia will contract by 2.7%, Sub-Saharan Africa by 2.8%, Middle East, and North Africa by 4.2%, Europe and Central Asia by 4.7%, and Latin America by 7.2%. These downturns are expected to reverse years of progress toward development goals and tip tens of millions of people back into extreme poverty.
Apart from that, as the working class migrates away from cities due to fear of contacting coronavirus, the economic face of metropolitan cities will change. Another problem is the amorphous, varied and often hidden nature of the gig economy makes it difficult to predict its future trajectory. COVID-19 has also shown us that most of our beliefs in the market and job sector are an illusion. Though they appear to offer high pay, more of the companies are here to make a profit. At the same time, while switching to automation is a solution to prevent industries from going out of business due to social distancing or others, it again threatens the possibility of losing human jobs to the arms of robots.