How has COVID-19 affected our Economies?
At the end of 2019, a new kind of virus emerge and began to dominate the news. Named COVID-19, scientists were still trying to figure out where and how it appeared. Our behaviour started changing; many people started wearing masks and washing their hands more frequently; we even started to work and study at home. The full impact of COVID-19 is still unknown, and ramifications will vary greatly across industries.
The first industry to be severely affected by COVID-19 was the service industry, as it emerged the virus can be easily transmitted indoors. Consequently, people began to limit their social activities. Many countries instituted travel bans and placed limits on travelling and business was now conducted online with many in-person conferences cancelled. The International Air Transport Association’s Chief Economist Brian Pearce (2020) states that if the impact of COVID-19 has a SARS-shaped profile, the Asian-Pacific airline will face a $28bn drop in revenues. This is a conservative estimate, as COVID-19 has already had a more severe economic impact than SARS. Furthermore, many airlines are facing cash flow pressures with some, such as Chile's LATAM and Avianca, even filing for bankruptcy protection. Others have started to sell their business class’s supplies to recoup their daily costs. For example, Australia’s biggest airline, Qantas, sold a $25 “care package”, which was aimed at getting rid of airline supplies. Many airlines also began slashing their airfares in a bid to attract more customers. Consequently, the tourism sector is now facing enormous challenges. This is due to the decline in air travel coupled with national lockdowns, travel restrictions and different national quarantines. This has led to a crisis in the catering and hotel industries, as people were no longer eating out due to lockdown measures. According to Lock (2020), the year-on-year decline of seated diners in restaurants worldwide was a staggering 36.61% by November 7 2020. Additionally, a growing number of people started to order takeout. In the USA, food delivery was 300 times more popular in March 2020 than in the previous month (Wolff-Mann, 2020). All things considered, the tourism industry must change its approach to suit the new normal and changes in the global market. Otherwise, they may not survive the winter months. At the same time, some restaurants have already found their ways to concur their difficulties.
The crisis is not only affecting the tertiary industry, but also the secondary industry. In many countries, the secondary industry is becalmed. Employees are unable to work from home, as they are manufacturing products in factories. Due to COVID-19 restrictions, workers are unable to work as normal in factories due to social distancing regulations. Thus, output from factories has fallen. Almost 21 percent of those surveyed stated that they are closing manufacturing plants in some locations (Abel, 2020).
However, the economic picture is not entirely bleak. Customers continue to buy daily essentials in supermarkets. Grocery retailers initially struggled to cope with the pressures of panic buying on the supply chain, especially for products like pasta, toilet rolls and tinned tomatoes (Ely, 2020). Supermarkets have had to hire more and more staff to help fill gaps in its supply chain. Tesco’s has added 16,000 permanent jobs to cope with the increase in demand (Butler, 2020).
Additionally, the online retail sector grew during this period. More than four in 10 consumers across Europe stated that they had purchased something online for the first time which they had only previously bought in-store (Alvarez & Marsal, 2020). Despite these promising trends, there were some signs that individuals were spending more frugally. Due to the economic uncertainty as a result of lockdowns, people bought luxury products less frequently. This is due to the uncertain job market and reduction in wages during the furlough scheme. As individuals worked from home, the demand for office wear declined, and the the luxury retail market was left struggling, as customers prioritized comfort over style.
Nevertheless, certain industries met some precious developing chances during the pandemic. For example, the car industry in the UK is looking promising – over 95% of UK car dealers are confident that their dealership will be able to survive the year (Jolly, 2020). This is perhaps due to the fear of contracting the virus on public transport. Other items have proven to be incredibly popular. At-home gym equipment sales are estimated to have spiked by 5,813% since the UK’s lockdown (Fenton, 2020). With many people beginning to take their health seriously, multi-vitamin sales in the UK reached record levels (Evans, 2020). While this is obviously a challenging time for many retailers, there are many opportunities for growth.
All in all, the COVID-19 is having a transformative impact on our economies. Some industries have suffered severe damage. Others have been able to grow due to changing trends in e-commerce. It will take years to learn the long-term impact of COVID-19, however, there is a sign of hope; 42% of 600 CEOs predict that the recovery will follow a U-shape, suggesting that the economy will eventually recover (Ghosh, 2020). As the UK slowly emerges from its lockdown and its economic future remains uncertain, it remains to be seen if the economy will rebound.