THE COVID ROULETTE – PICK A WINNER

Recession Is Unavoidable

Without any doubt, we will face a global recession after the covid-19 pandemic is over. The economic definition is two consecutive quarters of negative economic growth. Even now, when some countries started to ramp up their economies already, they won′t be able to go back to full capacity within the next foreseeable future. This is driven due to the global interdependency of markets. To break it down, these are the four main drivers:

• Demand is not on the same level as before yet or will be soon.
• Demand changed because of new priorities.
• Supply capacities are still limited.
• Supply has not adapted to new demand.

A New Economic Equilibrium

As long as all this is still in flux, it is hard to say, how the local and global economy will shape up in the long run. For sure, financial means will be short in the beginning as liquidity was drained to cover the missing turnover. Uncertainty of the intermediate post-Covid-19 time, when the new normal will only start to shape, will delay unnecessary spending by most people and companies. This will impact some industries negatively whilst others will see a positive impact. But careful, even after the pandemic has passed, we can still expect changes until we will reach the new economic equilibrium of the new normal. 

Who Will be The Winners And Losers?

For sure, we can identify sectors of the economy, which have been hit hard already. We can also see, where demand did increase because their services and products are highly needed right now. Additionally, we concluded already that spending for unnecessary things will be limited or put on hold for the time being. This is, where Maslow′s Hierarchy of Needs comes into the game. Physiological and safety needs are the current drivers of the remaining economy. All the other needs will follow one by one. However, we do not know, what will be the drivers that are going to fulfil our other needs in the future. This is rather tricky as there will be a new normal, which is driven by different motivations and expressions of these needs. 

This graphic from DCODE, an Egyptian business consultancy offers a good starting point by looking at the current impacts on key sectors of the economy as it can be observed in Egypt but anywhere else.

This article might only look at some aspects of a rather more complex situation, I would like to invite you to share your opinion, expertise or reflection.