Monday, 01 June 2020 05:15

These are areas of the economy that ‘will not come back’ quickly from Covid-19

Rate this item
(0 votes)

With many countries beginning to emerge from lockdown in the wake of the Coronavirus pandemic attention has turned to the economic recovery .

The potential shape of that recovery - U-shaped, W-shaped, V-shaped or even ‘square root-shaped’ - has split economists and strategists. All 50 U.S. states, along with the majority of European countries, have now taken steps towards reopening following lockdown restrictions.

Businesses are heading back to work, shops and restaurants reopening and airlines are preparing to resume flights.

However, chief investment officer at wealth management firm London & Capital, Pau Morilla-Giner said there were some areas of the economy that will not come back, at least not in the next five years.

These include consumer spending levels, many jobs, commercial real estate occupancy, global tourism levels and luxury goods spending. He added the venture capital-financed start-up boom and foreign student exchange levels were also unlikely to return in the short to mid-term.

Morilla-Giner said consumer spending habits, particularly for younger people, would permanently change as a result of the pandemic. He said much attention has been given to the pace at which economies should reopen, but so little at the “behavioral impact on consumers,” adding it was almost certain that people would spend less.

“For many millennials and Gen Z, one mantra will dominate spending habits from now on: ‘never again will I be financially unprepared for a crisis’. Uncertainty will bring caution, caution will bring frugality,” he said.

“Consumer spending accounts for about 70% of the western world’s GDP, so this will have a knock on effect on GDP growth rates,” he added.

U.S. jobless claims rose by 2.1 million last week, taking the total above 40 million since the Coronavirus pandemic took hold in the country. The rise was down on the 2.4 million claims made the previous week, but it is the 10th consecutive week with first-time claims of over 2 million.

Morilla-Giner said many of the numbers highlighted the “scale of the evolving economic damage and its likely deep resonance,” warning that many jobs would not come back.

“There is hope that many of these jobs will come back as the economy reopens, but the risk is that rising bankruptcies result in many furloughed workers being left on the sidelines,” he said.

The travel and tourism sectors have been particularly affected by Covid-19 with many countries introducing travel restrictions on top of stay-at-home orders. Airlines across Europe and in the U.S. , including American (AAL)  , Delta (DAL)  and United (UAL) , have sought state aid in the fight for survival as planes remain grounded.

Morilla-Giner said tourism was the “achilles heel” of the global economy as it is so discretionary.

“It took U.S. airlines six years to return to profitability after 9/11 and eight years for fares to return to what they were in 2000,” he said, noting that travel and tourism accounted for 10% of global GDP and supported 10% of all jobs on the planet before Covid-19.

The World Travel and Tourism Council has said the pandemic puts a third of these jobs - 100 million - and $2.7 trillion in GDP at risk.

 

MarketWatch

December 20, 2024

Naira expected to weaken further, says CBN business survey

Nigerian businesses anticipate further depreciation of the naira through early 2025, despite maintaining overall optimism…
December 20, 2024

Atiku questions alleged hack of NBS website, says timing suspicious

Former Vice President Atiku Abubakar has raised concerns over the recent claim that the website…
December 22, 2024

How to know if your memory lapses are serious or not

The older I get, the more panicked I become when something slips my mind. Is…
December 21, 2024

‘Professional Back-Scratchers’ charge up to $130 per hour

The Scratcher Girls is an unconventional relaxation therapy studio that charges clients up to $130…
December 21, 2024

NAFDAC busts illegal rice repackaging operations in Nasarawa, Abuja

The National Agency for Food and Drug Administration and Control (NAFDAC) has cracked down on…
December 22, 2024

Here’s the latest as Israel-Hamas war enters Day 443

Israel and Hamas appear close to a ceasefire deal. These are the sticking points Israel…
December 20, 2024

OpenAI launches voice and text access to ChatGPT through new phone service

OpenAI has introduced a novel way to interact with its popular ChatGPT artificial intelligence system…
December 17, 2024

Ademola Lookman named 2024 CAF Men’s Player of the year. These players won in other…

Ademola Lookman, the Super Eagles winger, was crowned the 2024 CAF Men’s Player of the…

NEWSSCROLL TEAM: 'Sina Kawonise: Publisher/Editor-in-Chief; Prof Wale Are Olaitan: Editorial Consultant; Femi Kawonise: Head, Production & Administration; Afolabi Ajibola: IT Manager;
Contact Us: [email protected] Tel/WhatsApp: +234 811 395 4049

Copyright © 2015 - 2024 NewsScroll. All rights reserved.