With such a heavily interwoven and networked global economy system, the GVC (Global Virus Crisis) is truly an unprecedented event in terms of its complexity & urgency. We have passed the peak of fear and panic, the financial markets are gradually back on track to recover.
More attentions are switching to economical perspective, there are quite a lot of forward-thinking thoughts beyond the crisis, and I picked up a few below which are not so technical, hope that can help you navigate some decision-making for your investment or careers in the future:
- The GVC will cause a great deal of permanent economic damages along with digital-era disruption which speed up the destruction process of weak companies and unproductive employees. Many businesses will come back looking different, shedding low quality workers and closing unprofitable activities/subsidiaries. Some industries will be permanently changed. The whole global communities are being forced to get used to online shopping, education, communication and the associated delivery process, reducing the demand for traditional business models.
- The commercial property sector will face a permanent global decrease in the demand for both office and retail space. The GVC has forced the global labour market to work remotely. Many companies would conclude they can save huge amounts of overhead by remaining so. This means the value of commercial properties will decline, and the risk associated with commercial property debt could increase sharply.
- With the cheap video-conference technology (eg, Skype & Zoom), the value of face-to-face meetings may fundamentally dissipate. This could result in a permanent decrease in the demand for expensive business-related travel and accommodation as well as the decreased demands of airlines and hotels.
- The unemployment rates may not quickly return to the pre-GVC levels, which will amplify the short-term downward pressure on wages. There is likely to be a sustained increase in long-term unemployment as weak businesses fail and surviving businesses revisit cost structures.
- Whether the GVC evolves into an inflationary shock. The deflationarypressure of the GVC via the huge sudden increase in labour supply to overwhelm the inflationary pressure of the crisis over the short-to-medium term (ie, in the next year or two).
- The global economy is going to be burdened by a great deal more public and private debt as a result of the enormous fiscal policy responses, which will need to be serviced through tax revenue and corporate/household earnings. This will undoubtedly drag on future global growth after the initial quick increases in business activity and the working-age population gets back into employment again after the near future.
- The manifestation of sudden virus crisis is likely to result in an increase in global risk-aversion. Similar to post-GFC, It will adversely impact confident/sentiment for an extended period of time.
In a short summary, in regards to what will happen once we pass through the Global Virus Crisis’ (GVC), I am more inclined to believe that the most likely case to our future economic recovery would be an initial surge after the lockdown restrictions are lifted and then followed by a slower growth phase driven by a huge increase in debt repayment burdens and huge digital destruction of excessive labour supply after the virus forces the global economy to reluctantly but effectively rewire itself.