Comment: The shifting world economic order
Gates Hospitality chief executive and founder Naim Maadad discusses the lasting impact of COVID-19 on global economies
Around the world, life as we know it has changed drastically and undergone a rapid transformation beyond our wildest dreams a few months back. Global leaders and millions of citizens are facing the challenge of a lifetime and grappling to come to terms with the reality of the situation. The Novel coronavirus COVID-19 pandemic is threatening not just healthcare systems, but also the livelihoods of each and every citizen; hitting shattering blows at the foundation and stability of world economies.
Early estimates predicated that, should the virus become a global pandemic, most major economies will lose at least 2.4% of the value their Gross Domestic Product (GDP) over 2020. To put this number in perspective, global GDP was estimated at around 86.6 trillion U.S. dollars in 2019 – meaning that just a 0.4% slide in economic growth amounts to almost 3.5 trillion U.S. dollars in lost economic output. However, these predictions were made before the COVID-19 becoming a global pandemic, and before the implementation of widespread restrictions on social contact to stop the spread of the virus.
Now that the World Health Organisation has declared the Novel Coronavirus as a truly global pandemic, the economies of the world are surely on a tangent of a different tailspin altogether.
With an understanding of each region’s economic structure, governments can quickly identify places where the economy can be restarted. To do that well, governments can assess both the risk of transmission and the relative economic importance of each sector. For instance, authorities might define importance using metrics such as total employment, vulnerable jobs, or contribution to the economy.
There is no two ways about the fact that we are currently facing the biggest global public health pandemic since the Spanish flu outbreak of 1918 after World War I. With good reason, media interest has been focusing on the public health aspects of the crisis. But there is increasing concern about the economic consequences of the COVID-19 outbreak, as issues involved in fighting wars on both fronts become entwined. It’s a public health crisis first and foremost but there are some key learnings that the Middle Eastern region will have to keep in mind when the economy eventually recovers.
Governments need to go early and hard to launch several stimulus packages targeting households, small businesses and selected industries adversely affected by COVID-19 such as the arts, sports, education, retail, entertainment, tourism and aviation. Previous methods would not work now as this time it is a self-inflicted slowdown due to the lockdown and restrictive directives. A big stimulus to the economy when the lockdown is on may not bring the desired results. It would have to be a multi-tiered strategy which would be driven sector-wise, depending on their contribution to the economy, with minimal health risk of a community spread. It's a tight balancing act for decision-makers.
Social distancing has become the norm across the globe which prevents people from being in groups. We have gone from social animals to a socially distant ones. This may be a passing phase but it has vast economic implications and may even change how we work in the post-pandemic economy. Will we find that we can work have a home-office and have majority staff meetings on video-calling platforms? Will the reduced traffic blocks and dipping carbon emissions give us some sense of direction as to what may work in a future environment? The COVID-19 pandemic could provide a remarkable controlled reality experiment to how mankind adapts to change when we are given no other choice.
COVID-19 will bring in a paradigm shift in how we do our shopping, travel and work for at least a year to come and likely more. It is inconceivable that one can have the same business model today as you did 120 days ago. Take action at the earliest available opportunity and fast but act with compassion. Countries are naturally anxious to restart their economiesbut those that deliberately create the next normal with a long-term vision, rather than moving to the next stage haphazardly, will have greater success in saving both lives and livelihoods.
About the author
With more than 28 years of hospitality experience globally, Naim Maadad is the founding CEO of Gates Hospitality, which owns and operates hospitality concepts including Ultra Brasserie, Bistro des Arts, Reform Social & Grill, Publique and Folly by Nick & Scott. The company also has ownership of Six Senses Zighy Bay.