Normal expectations for life, business, and the economy are being challenged every day by COVID-19. Each sector has suffered greatly andneeds to be addressed to make any progress back to normalcy. However, the current forecasts of the COVID-19 aftermath suggest recovery will not be reached until international flows have once again been established. Currently, economists are mulling on multiple aspects, such as the evolving global growth patterns, challenges developed countries will face, and those supply chains face as well. The following article dives deeper into each of these concerns.
Useful perspectives by Beth Debouvre
At this point, it is challenging to predict the future, as the longevity of the pandemic is unclear. However, business leaders can look for specific patterns to give them an idea of what to expect. Beth Debouvre, an expert in economic grown and development, shares her tips on this idea below.
- The global growth patterns
People must look at international growth patterns. When times are favorable, the economy typically experiences a higher rate of GDP growth. Contrastingly, during unfavorable times, it shrinks faster. Currently, we are witnessing unprecedented decrease in small countries’ GDP. This is primarily due to border shutdowns around the world, thereby affecting global flows. While globalization and the reestablishment of global interconnectedness will surely help the global economy and the economies of small developing countries, this cannot happen during the current state of the world.
- The superpower fragilities and frictions get gradually destabilized
Several groups predicted the novel coronavirus would increase global economy fracturing along regional lines, including those regarding the competing blocs of the United States, China, and probably Europe. Both Europe and the United States lagged behind China in enforcing COVID-19 related restrictions and policies. As these regions are still greatly suffering, it can be concerning to entertain the idea of reestablishing these global flows. Thus, perhaps an emphasis on building regional trade may benefit the global economies and lessen preexisting tensions between these blocs. That being said, this steps should be taken gradually, as any egregious measures could be disastrous to the recovery of the global health and, consequently, the global economy.
- Managing supply chain strategies
Due to the presently tumultuous situation of the world, it is more important than ever to focus on the development of sustainable supply chain policies. Policies must take into consideration how to reshape the FDI flows and trade. Perhaps the first policies enacted should discuss globalization and focus on reshoring versus redundancy. Is it possible for countries and companies to seek higher safety in global diversification?Should they focus on regional supply chain strategies instead and prioritize domestic capabilities?Traditionaleconomic logic usually supports the first approach, with the addition of national stockpiles for the correct essentials. However, the current global health situation may be forcing countries to examine the second approach as a viable alternative.
The latest researchshowcasesmany traits of politically sensitive vertical industries. Findings include the necessity of producing products that prioritize health safety and the changing domestic workforce size of industries. If companies decide reshoring is the exception while redundancy is the reality, we can expect a slow international trade growth. Though the current global situation would require ample diversification in trade partners from multiple countries for this to work.
Companies need to keep these three essential perspectives in mind as they plan their business moves and project future outcomes.