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In a post-pandemic global economy, expect only the fittest to survive – and emerge stronger than ever
- In a period of economic Darwinism, the pandemic will finish off weak businesses, leaving dominant firms, such as Amazon and Huawei, even stronger
- More protectionist trade will favour the rich countries able to subsidise their industries, keeping poorer nations in recession for longer
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Why you can trust SCMP
The pandemic is posing many challenges to governments, with millions affected and more than 160,000 dead. The world economy cannot significantly recover unless and until testing is widely available – so businesses can rehire those with immunity – and an effective vaccine is widely available, though this is probably a year off at least.
In the short term, with locked-down businesses and social distancing, economies are suffering major downturns. The impact will be severe, possibly into the medium term. Isolation measures are causing an enormous reduction in domestic demand in many countries, and a huge dip in savings.
Consumption of everything but the bare essentials will slow for at least several years. Many will have to borrow the maximum on their credit cards just to pay for food, clothing and shelter.
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Once economies begin to recover, governments are expected to encourage domestic consumption. Manufacturing has fallen in many countries, with factories closed and workers furloughed. No economy is immune.
US macroeconomic data is showing negative growth. Italy, Spain, and even Germany and France are sinking into recession. Optimistically, Germany’s economy is expected to shrink by 1.9 per cent in the first quarter, and 4.2 per cent for the full year.
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Almost all regions will suffer double-digit declines in exports and imports this year; the World Trade Organisation predicts a best-case reduction in world trade of 13 per cent, and a worst case of 32 per cent.
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