31 Mar 2020, 11:41 — 9 min read
The COVID-19 (Corona Virus) has been declared as a pandemic by the World Health Organization (WHO) and has officially affected more than 325,000 individuals across 170+ countries as on 22 March 2020.
While it has created a health scare; its impacts on the global economy and politics could be far reaching. The hospitality, airlines, travel and tourism, transport, marine, and poultry are few industries that have already started experiencing its impacts; the others may feel the jitters in weeks to come.
Smart and agile businesses will ride the wave, open opportunities for self and their economy for the next level of growth. Let's be aware and start preparing for the inevitable.
Marriott’s CEO Arne Sorenson came out of his illness to announce the impact of the crisis on their business and have granted furlough to tens of thousands of its employees globally. He also mentioned the overall impact on the hotel industry where many small hotels have either already shut down their operations or are preparing to do so. Marriott itself has seen its business down by 90% in Greater China; up to 75% in the rest of the world.
Airlines industry is no different; the International Air Transport Association (IATA) has already appealed to governments in Europe, as part of a worldwide campaign, for emergency government intervention as they fight for survival due to the collapse in air travel as a result of the COVID-19 crisis.
As per Alexandre de Juniac, IATA’s Director General and CEO, “Airlines globally are fighting for survival. European air traffic has suffered an unprecedented decline, with some markets down 90% compared to last year. Millions of jobs are at stake. Airlines need urgent government action if they are to emerge from this in a fit state to help the world recover, once COVID-19 is beaten.”
On a global basis, IATA estimates that emergency aid of up to $200 billion is required.
Also read: COVID-19 impact: Impact of the RBI rescue measure
By the impact seen so far, it is the worst-hit crisis our current generation has seen in its lifetime. It’s important to understand how this could be different from any other we have seen so far in our lifetime.
In all previous crises, the economies were hit at the top wherein global giants like Lehman Brothers went bankrupt and others like Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester came within a whisker of doing so and had to be rescued.
The direct impact of earlier crises on the lower strata of society or bottom of the pyramid was little and a roadside vendor was still able to sell as many burgers; cab driver was getting enough passengers daily; farmer, daily wager or those employed with the unorganised sector (a majority of the workforce in India & other developing economies) weren’t much impacted.
Whereas in the current crisis, these segments are the worst hit. With cities including the financial capitals globally under lockdown, there is no movement on the roads and obviously no one is spending a dime in eating out, traveling, shopping, entertainment, etc. The reduced buying power of this segment will break the consumption cycle.
With current lockdown bound to continue for weeks, the reduced consumption will make recovery even harder. Even post-recovery, people will be extremely skeptical to spend, travel, we will be staring at a big erosion in our GDP and employment growth numbers.
Never before has the government ordered the closure of business activities, imposed lockdown and curfews at such mass levels. The situation is no less than World War-II, but with more connected economies. Hence, the impact will be more global and none can isolate itself from the aftershocks.
In its annual analysis quantifying global economic and employment impact of Travel & Tourism in 185 countries and 25 regions, the World Travel & Tourism Council’s (WTTC) research reveals that the sector, directly and indirectly, accounted for:
Global sports and recreation industry which recently significance is also one of the worst impacted. On one side, the Indian Premier League (IPL) has been postponed and there are no confirmed dates for the 20-20 Cricket World Cup either, the other side talks for postponement of Olympics is gathering pace.
Similar is the case with the entertainment industry; movie releases and events have either been canceled or postponed indefinitely. Movies and shows in making have also been stalled.
Automobile, the backbone of Indian manufacturing has already been reeling under pressure for more than a year now have been hit by both at demand and supply ends. Maruti Suzuki, Honda, Hero Motors and other OEMs have already shut their plants in India; having a ripple impact on their suppliers forcing them to follow the footsteps and close their plants.
The rest of the sectors are not unaffected either; FMCG, Manufacturing, Garments, Textile, Retail, Real Estate, Ride-Hailing, E-Commerce, Electronics, IT / ITES, Education have all started feeling early jitters.
It’s anyone’s guess that the crisis will have an adverse impact on job creation, increment, employee welfare spend, rewards and recognition; one of the biggest impacts, in my opinion, could be psychological.
We all are getting to depressing news every day, being scared of anyone walking near us, hearing dooms day’s conspiracies, getting worried about the wellbeing of self and dear ones.
While economists are debating if it will be a sharp, short recession or a prolonged downturn; it's bound to have a geopolitical impact and will force nations to reprioritise on their investments and global allies.
Opportunities for mergers and acquisitions will open up. Smart and agile businesses will ride the wave, open opportunities for self and their economy for the next level of growth. Let's be aware and start preparing for the inevitable.
Also read: An unprecedented challenge, also an opportunity for SMEs to do unprecedented things
Image source: shutterstock.com
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