This time is different - decoding a global crisis

If anyone thought that they were immune to the effects of the coronavirus because they lived far away from its epicentre in Asia, the developments in the past week would hopefully have shaken them out of their complacency. It is estimated that over $6 trillion in value has been wiped out from the stock markets in the last 6 days. Both the Dow and S&P 500 have lost more than 10% in the same period, resulting in the fastest market correction since the global financial crisis. But go back a month, you might as well be living in a different planet, with stock markets rising to new highs despite news that the virus have caused more than 70,000 infections and 2,000 deaths in Asia. The virus has since infected more than 84,000 people across at least 56 countries, spreading rapidly through Middle-east, and now parts of Europe. In the U.S, there are at least 60 confirmed cases, and San Francisco has already declared a state of emergency over the coronavirus. The World Health Organization is reluctant to declare covid-19 a pandemic at this point, but that position is likely to become increasingly untenable.

For the optimists, some statistics offer hope. According to healthcare professionals, the disease is relatively mild for 80% of those inflicted. The fatality rate hovers at around 2%, compared to 10% for SARS and 35% for MERS. Epidemiologists expect the virus to moderate or burn itself out over time through self-selection - only milder forms of the virus will survive as they are more likely to pass on from their (still living) hosts. Warmer weather in the coming months will likely make it more difficult for the virus to survive for long periods of time in the open air, reducing its transmissibility.

Yet, despite these reassurances, the world has never been in a bigger state of panic. The clearest evidence that this time is different, is the complete closure of national borders to the worst affected countries. Partial or full travel restrictions issued for China, Singapore, Japan, Korea, Iran and Italy have had a dire and immediate impact on a multitude of tourism-related industries - airlines, hotels, retail and F&B. Within countries, entire cities and regions have been locked-down - factories closed and schools shut. These efforts to contain the virus have not only affected local economies, but disrupted global supply chains. Compared to the time of the SARS outbreak, China's contribution to the world economy has grown from 4.3% to 16%. In the same period, China has doubled its share of trade with the rest of the world. As factories in China rest idle, global brands like Apple and Jaguar Land Rover have already announced that they will not meet their revenue targets because of supply issues. On the demand side, with Asia contributing 70% of global growth in 2019 (from China, 41%), the knock-on effect of a fall in Asian consumption will be felt by any company with an international presence.

Are these aggressive containment efforts worth their toil on the global economy? Due to its lower fatality rate and higher transmissibility, experts have compared covid-19 to the H1N1 swine flu, rather that its direct cousins SARS and MERS. The H1N1 pandemic occurred in 2009 and it was estimated that it had infected close to 700 - 1400 million people, with 150,000 - 575,000 fatalities. While the numbers look significant, it translates to a mortality rate of less than 1% at most. At the moment, covid-19 seems twice as deadly, with a similar rate of transmissibility. Without containment, we could be looking at potentially 300,000 - 1 million deaths - the world has only recorded around 2,800 deaths to-date. Furthermore, in developing countries with less effective healthcare systems, the fatality rate can be much higher (close to 14% for Iran based on reported cases). For those inclined to dismiss the outbreak, they might want to run the numbers again.

In this context, what are the implications for leaders of countries and businesses? The WHO has lauded the Singapore government for its speedy and aggressive response to containing the virus. Singapore has moved quickly to close its borders to China, implemented a rigorous contact tracing and quarantine program, leveraged its primary care network to support the public hospitals through its Public Health Preparedness Clinics (PHPC) and mobilized all communication channels, including WhatsApp, to share latest news on the virus and educate the public on prevention measures. As a small island state with strong reserves and an effective healthcare system, Singapore is better positioned than most to deal with the outbreak. However, whilst these measures work well in the short-term, their sustainability in the long run, especially if the outbreak turns into a full-blown pandemic, is uncertain. Already, the cost to the economy is escalating by the day. An expansionary budget may provide some relief, but cannot address a sustained decline in global and local consumption. In the recent days, large listed companies in Singapore have announced hiring freezes and pay cut-backs for senior executives. For Small-Medium Enterprises (SMEs) without the same deep pockets, staff retrenchment is probably well underway. In contrast, the healthcare sector needs to contend with the lack of manpower, especially if secondary waves of infections start to occur.

Both countries and businesses need to brace for more volatility in the days ahead. For countries, aggressive containment measures at the onset will buy time to mobilize the healthcare system and educate the public, but closing borders to the rest of the world indefinitely is not the answer. Businesses need to go beyond cost-cutting measures and identify new opportunities from the crisis - as demand for some goods and services wane, demand for others may increase. The food and grocery delivery platforms in Singapore can certainly attest to that. In the long term, leaders need to reimagine how they will operate in a world where pandemic fears continue to simmer, or even escalate. They will need to think laterally to address new needs, develop new capabilities and reallocate existing resources. This will require looking objectively at the data, but also tapping into what makes us uniquely human - our courage, empathy and creativity. The crisis has the potential to bring out the worst in us, as seen in rise in discrimination against certain races and even healthcare professionals. Similarly, it is a chance for human goodness and ingenuity to shine. Only time will tell which path we will choose to take.