The first quarter of 2020 took a great plunge downwards for all businesses, big or small. Air conditioning installation and other service-related businesses were not an exemption. The travel industry has been greatly impacted by a various halt on many sporting and entertainment events.
Economic researchers currently agree on one thing: the global economy is in recession, possibly the deepest that has ever been measured in the West without the effects of war. While there are many predictions collapse in global economic output, the Council of Economic Experts is somewhat more optimistic.
What coronavirus means for the global economy
From the second half of the year, according to economic researchers, things will gradually start to pick up again. Businesses and citizens are making up for expenses that they have postponed because of the corona- related restrictions. 2021 could even be a boom year if stimulus packages and central banks’ money injections fuel the economic recovery. The price jumps on the stock exchanges in the past few days show that many investors view the prospects similarly.
The core scenario currently looks something like this: We are currently experiencing an abrupt decline in economic output. But because the states are cushioning the economic impact of the pandemic with voluminous financial injections, things will continue as before. The Corona episode would go down in history as a bad medical crisis. But from an economic point of view, it would soon be ticked off.
A profound change in economic structures
The crisis is likely to change the economic structures profoundly. We don’t yet know exactly how this change will take place. But it is obvious that the pandemic and the political reactions to it will reinforce and accelerate some trends that have been visible for years. I pick three developments:
The globalization is limited. The cross-border movement of goods, services, people and capital is hindered by all kinds of restrictions. States selectively favor domestic suppliers and industries over foreign ones.
The digitization always impacts on other areas of the economy. Data becomes the central resource.
In many markets, concentration has progressed to such an extent that it is controlled by a few or even a single company.
These trends are mutually beneficial. Now the corona crisis has started a dynamic that will further increase the power of already large companies. This is bad news: As competition intensifies, the economy, especially consumers, as well as smaller companies and their employees, suffer.