How COVID-19 Has Affected the Economy

A look at how the pandemic has impacted the economy and consumer behavior and how businesses can prepare to safely reopen

The Thrive Global Community welcomes voices from many spheres on our open platform. We publish pieces as written by outside contributors with a wide range of opinions, which don’t necessarily reflect our own. Community stories are not commissioned by our editorial team and must meet our guidelines prior to being published.

All aspects of life have been adversely affected by the outbreak of the coronavirus pandemic. In particular the economy has been severely affected from COVID-19. According to research, the Gross Domestic Product (GDP) of G20 countries grew by 3.1% in 2019, it is forecasted that the pandemic will cause the GDP to decrease by 0.4% in 2020 compared to the previous year, to 2.7% growth. 

From radically reduced unrestricted consumer spending, to a halt on various business activities, including hiring, capital budgets, the decline of most business functions — except for only the essential operational expenses — forcing some businesses to file for bankruptcy, the economy is nothing like it used to be before the pandemic.

All in all, as people undergo the current harsh conditions, it is probable that some organizations will become much more critical to our lives and could potentially attract an increased demand.

Minimize the Digital Marketplace Divide

The global disaster due to the coronavirus pandemic further pushed the world into a digital marketplace. The current changes are likely to offer lasting impacts once the new norm sets. According to the United Nations Conference on Trade and Development (UNCTAD), the coronavirus pandemic has accelerated the use of digital tools, solutions and services to speed up the global transition toward a digital marketplace.

Nonetheless, the crisis has revealed the wide gap between digital and analog, exposing just how far many organizations lag in digitization. The disparities in digital readiness hinder businesses’ ability to take advantage of the modern technologies that help curb the spread of the virus by working from home. This situation comes with significant development consequences that one cannot overlook. Businesses are forced to get creative and adopt new technologies to keep their business thriving today, as well as staying afloat post pandemic.

“Many countries are riding a wave of digitization in the wake of the coronavirus pandemic, with office staff working from home, friends meeting on video conferencing platforms, online trade booming and governments rolling out tracing apps to track infection chains,” states Aaron Vick, CEO of Cicayda, a legal discovery software company. “However, developing and emerging countries could suffer setbacks in their efforts to strengthen their economies and societies through the adoption of digital technologies. Now more than ever, states must double down on efforts to ensure a globally just digital transition.” 

The Importance of Digital Technologies during a Pandemic

During the global crisis and the lockdown restrictions, digital technologies have become crucial for connectivity by allowing the continuity of our regular lives and connecting individuals worldwide more than ever before. As countries and states ask their residents to work from home, most people have turned to their gadgets like smartphones and laptops to discover tools to stay in touch and work. 

Most of these habits are projected to continue in the new norm. Thus, there is an increased essence of dependable digital infrastructure people rely on and various information communication technology (ICT) aspects that benefit from the pandemic. For example, there are increased ICT prospects in multiple sectors like telemedicine, telework, logistics, food delivery, buying online, paying online, as well as remote learning and entertainment.

The Behaviour of Consumers

After months of lockdown restrictions, most people anticipate the day when things get back to how they previously were. Some communities are adapting to the new norm with little friction as it is more realistic to understand that the virus is here to stay. With this, the whole population is mandated to remain responsible, as it will suffer the consequences of the crisis for more extended periods than expected if they chose to turn a blind eye to health protocols.

The first few months of the pandemic restrictions have forced people to adopt new customs and habits that will remain in place. These new habits will typically leave impacts on various aspects of life. For example, six-feet separation and no contact are essential to continue curving virus transmission rates. 

Online Shopping

The realization that people could not shop at store-fronts to purchase basic necessities was difficult to get used to. As this news reached people, shoppers flocked the supermarkets to buy food items to stock up for a couple of weeks or months. Once the initial panic was over, people progressively adjusted to the new habit. 

The fear of contracting the virus, alongside the closure of various stores, forced people to incorporate buying items online. Prior to the pandemic, only 10% of Americans purchased goods and services online. Today, more than 30% of Americans say that they are buying online to avoid going to physical stores.

Amazon purchases significantly spiked in March and continue to rise as the pandemic unfolds. The e-commerce giant quickly adapted health protocols for its workers and employed additional help to meet the high consumer demand.

This consumer behavior is anticipated to stick around post pandemic. Most stores that are still in operation are doing their very best to safeguard both customers and employees by providing drive-through, takeout and delivery services with increased health protocols. 

Business Considerations for Reopening

Various states have started to proceed with re-opening while others that re-opened quickly are locked down again. Based on your state, different businesses like dental offices, surgical centers, gyms, restaurants, movie theaters, salons, and golf courses have already resumed operations. Nonetheless, irrespective of the kind of business, all states that have swiftly moved toward relaunching their economy, demand that businesses take the required precautions to keep the public safe and avoid the virus’ resurgence.

Plan for Safety

The Center for Disease Control (CDC) has stressed that employers and businesses need to plan to respond to various disease transmission levels in the local community. Therefore, companies must refine their responses to an emergency as required. When planning to reopen a business, owners need to lower transmission among the workforce by enforcing health protocols to maintain a healthy working environment and mitigate the virus’ spread. 

“The government is essentially saying that there is a floor, a minimum, level of effort everyone should do to reduce the spread of COVID-19. However, when your local community experiences an uptick in cases and spread, you’ll also need to increase your efforts to help mitigate the spread,” states Shaun Roberts, Co-Founder of Sanitation Zone, a provider of fast and easy-to-use sanitation stations designed to keep people healthy and safe. 

“There are basic things we can all do to help slow the spread. Wear a mask if you are public facing. It would be a good idea to offer hand sanitizer and disinfectant wipes at entrances to the building and throughout the building. Not only does this help you follow what CDC is recommending, but it also sends a message that you care for your customers and your most valuable asset: your people,” adds Roberts.

As each state manages the pandemic at varying intervals and goes through the phases of re-opening, business owners are implored to take into consideration the virus transmission in their area and effectively implement health guidelines to continue to curve the virus’ spread.

Businesses Filing for Bankruptcy

President Donald Trump signed in the CARES Act to provide a $2 trillion economic stimulus package to support U.S. businesses and individuals impacted by COVID-19. Revisions to the U.S. Bankruptcy Code were also made in order to provide improved bankruptcy relief to small businesses and individuals during this time. By amending the Small Business Reorganization Act of 2019 — effective Feb 2020 — it allowed businesses to temporarily increase the debt threshold for filing for relief under a new chapter of the Bankruptcy Code — which increased from $2,725,625 of debt to $7,500,00. Now, more small businesses will qualify for a streamlined and affordable bankruptcy process with the amended chapter. 

“This new bankruptcy rule was created to facilitate less costly bankruptcy processes. For small businesses the cost of filing for Chapter 11 was just too expensive,” states Pradeep Khurana, Managing Director of ContinuServe, a company focused on IT and finance business process outsourcing. “The economic damage caused by COVID-19, especially in sectors like hospitality, travel, retail, and healthcare, is going to lead to increased corporate bankruptcies, restructurings, and corporate divestitures. The ironic part is the PPP loans have extended the lifeline for companies which may have delayed some bankruptcy filings. Also, the shelter-in-place and travel limitations and bans on indoor store visits also damaged the sales for many companies and accelerated financial distress, but it actually delayed the bankruptcy filings. We expect to see a lot more corporate bankruptcy, restructuring, and divestiture activity by fourth quarter 2020.” 

Some businesses might also consider carve-outs, a form of corporate sale, to alleviate the underperforming units and help the parent company generate cash and focus on other business objectives. These carve-out transactions are expected to rise as government support programs expire.

Life after Coronavirus Pandemic

Life after a global crisis pivots as society adapts to the new norm. In most ways, life is anticipated to continue as usual, but it is also expected to change the way we proceed with day-to-day activity. Typically, you will see a permanent alteration in various health habits. On the other hand, the technological solutions that came about during the pandemic will become engrained. As the experts have said over and over again, people will always see innovations and opportunities in times of crisis. Eventually, the solutions and inventions that benefit individuals without burdening or compromising them will see long-lasting implementation and it is not projected to be different this time around.

Share your comments below. Please read our commenting guidelines before posting. If you have a concern about a comment, report it here.

You might also like...

Economy
Community//

Joseph F Loprestitells how you can play a role in turning the economy around during COVID-19

by Joseph Lopresti
Community//

“Understand your value.” With Charlie Katz & Kathleen Chan

by Charlie Katz
Community//

Vlad Krishtop of ‘KONSTRUKTOR’: “Change will come across the economy”

by Fotis Georgiadis
We use cookies on our site to give you the best experience possible. By continuing to browse the site, you agree to this use. For more information on how we use cookies, see our Privacy Policy.