Fighting COVID-19 - Critical factors in order to start the wheels turning again
There are positive signs that the spread of the coronavirus has stabilised in many countries and that the outbreak is past its peak. Governments in Europe, the US and Asia have thus begun planning to safely restart their economies.
Mass testing and new technology will be vital tools – and part of an “infrastructure” – to prevent new outbreaks and allow steps towards normalisation. There are many indications that time, and this infrastructure, will enable the world to be better prepared for the next virus wave.
The COVID-19 crisis has generated creativity and global competition in medicine and technology that is encouraging, both in the near term and further ahead. Government exit plans will enable various parts of the economy to restart. For manufacturers, the timing of these exit plans will have to be fairly well synchronised at the national and global levels. Otherwise some production will stop due to subcomponent shortages.
What is the first step?
Number one is to restart production. After that, consumption will also have to resume. Households must feel that it is safe to go to work and spend their money on goods and services. Businesses need to know that they will not face new production shutdowns. Being able to feel safe amid the new “infrastructure” of technology and medicine will determine how rapidly normalisation can occur.
The Chinese economy is estimated to have reached 90 per cent of normal status. This has occurred 2½ months after the lockdown in Wuhan, the city where the spread of the virus apparently began. Worth keeping in mind is that China’s economic recovery is now being adversely affected because the rest of the world has entered a deep recession.
The EU and the US are expected to gradually reopen their economies in May. Although it is uncertain how fast this will happen, there is already heavy pressure on governments to speed up the reopening process. This pressure can be expected to increase further as unemployment accelerates in most countries.
Fast restart brings potential advantages
Pressure will also come from manufacturers, based on growing concerns about loss of competitive neutrality and about buy-out risks. Companies and countries that restart fastest may enjoy big advantages and opportunities to gain market share at the expense of countries and thus companies that have decided to keep production closed for longer. Governments are likely to carefully monitor what others are doing, in order to ensure that their own manufacturers are not put at a competitive disadvantage.
Risk of undesired buy-outs
When countries emerge from the crisis at different rates, there is also a greater risk of undesired buy-outs. There is already a debate under way about how China, for example, views acquisitions of companies in other countries that have been temporarily weakened and are thus cheaper because their share prices have fallen. This dynamic the competitive aspect and buy-out risk will provide an incentive to launch the restarting process as fast as possible. It may thus happen quickly.
Read the full article in the report, page 20-22.