What happens after the virus?

Posted by: Paul Donovan

28 Feb 2020
  • Near term, the global economy will be driven by how far fear of the coronavirus spreads. Global growth has rested on consumer spending over the last year. If consumers are afraid (whether rational or not), they may spend less in the short term. If that happens, it hurts the global economy.
  • Longer term, the virus may accelerate three existing trends in the global economy. Globalisation has already peaked. Technology has been slowly encouraging localisation. The virus may speed up that process, particularly coming after the uncertainty of US President Trump's trade taxes.
  • Home working has increased with the virus. Once employers and staff discover that home working works, it may become more common. It often takes an external shock to encourage home working (the 2012 Olympics may have driven the rise of UK home working). Online consumption of entertainment and some goods has also increased with the virus. As with home working, once people change their habits they rarely change back.
  • There are lots of economic implications. Transport and logistics will change. Demand for investment goods may rise (building local production). Demand for office and retail real estate could fall. The more important disruptions from the virus may lie in the long term.

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