In a world of fear and panic, compounded by a global rulebook that is increasingly being suspended, firms are struggling. Companies do not manage increasing risks and growing uncertainty very well. The natural inclination is to suspend all decisions—to not hire any additional staff, to retrench, to cut costs, and to limit future investments. Contraction by firms only exacerbates the challenges. Companies that are in shutdown mode are not buying goods or services. Suppliers are caught, unable to manage their own costs. Many of these challenges are going to be hard to manage, no matter what responses governments provide. Companies and citizens will make their own decisions about employee and personal health risks. Individuals that end up with radically altered lifestyles as a result of prolonged periods at home or out of work may permanently change their buying patterns. Unlike companies or households, government cannot simply shut down. It has to do two things that are hard: manage the immediate situation and plan ahead to limit future damage. Understandably, the former task occupies most of the time and attention for officials. But the latter also needs focus or countries will come out of this current crisis unprepared for accelerating growth and supporting future development.
The Virus, Trade and You
As the number of cases of the coronavirus continue to multiply, with increasing cases in a wider range of countries, it is becoming important for companies to start thinking about the potential impact on bottom lines. While a natural reaction might be to curl up on the couch, this is not the time to just cover up and hope for the best. No one can say with confidence what sort of economic growth might be at risk from the virus. But it is becoming obvious that the economic and trade implications can be substantial in the near term. The extent to which the virus causes widespread economic losses depends on at least three things: 1) the duration and strength of the virus; 2) decisions by governments to the virus spread; and 3) the reaction of citizens and firms.