THE E ECONOMY A AFTER CO CORONA RECOVERY O OR IN INTENSIV IVE C CARE? Professor Sir Vince Cable
Ag Agenda Causalities and Great Economic Profiles of Depression and Opportunities for Disasters Recovery Recovery Business Globalisation: National policy Forces for The State Returns Trends in debt responses to Disintegration pandemic and Integration 2
Great E Economic D Disasters (decline in Annual GDP) Break-up of Austro-Hungarian Empire circa 60% Break-up of Soviet Union | Russia circa 50% Great Depression: USA 30% Eurozone Crisis: Greece 30% End of Communism: Poland 20% Financial Crisis 2008/2009; UK and USA 5% 3
Fou our r prof ofiles: V | | U | | W | | L V Rapid recovery Trace and test Strong government/social cohesion Korea, Taiwan, Germany, now China U gradual recovery Profiles o of rolling lockdowns until vaccine slow supply chain/inventory/finance adjustment Recovery Re lighter touch government Most of Europe, N. America W Second wave of virus or mutation Economic relapse L Virus wins. Containment largely fails Long term damage to supply chains; financial system; free trade Low confidence: balance sheet depression and debt 4
Profiles o of r recovery t to 2 2020 Prof Pr ofiles of reco les of recover ery t y to 2 o 2022 20 10 0 W TREND ND % BELOW TR -10 V U -20 % BE W L -30 -40 -50 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 TIME PE TIME PERIO IODS DS 5
Depression a and R Recovery Depression Recovery o Mass unemployment (10% +) o Lockdown lifted o Destruction of SMEs o Government rescue o Collapse of consumption o Government stimulus o Collapse of business investment o International coordination o Chronic uncertainty o China/East Asia lead o Policy failures: USA; Eurozone o ‘Roaring twenties’ again 6
Casualties a and O Opportunities f for Business 1 1/2 Casualties Opportunities (general) (general) o Cash poor o Cash rich o Small o Big o Face-to-face (customer) o E-commerce o Staff contact o Remote working o Conservative/Analogue o Innovative/Digital 7
Casualties a and O Opportunities f for Business 2 2/2 Casualties Opportunities (sectoral) (sectoral) Hospitality Property Supermarkets Farming (Hotels; Restaurants; (Commercial; Conferences) Estate Agents) Tech companies Bio-science Spectator Events Cultural Most manufacture IT services Ed-tech Travel & Tourism (Airlines; Some construction Online retail & Computer games & Public Transport; Cruises) (50%) services animation Oil; Upstream and Leisure Logistics & delivery Pharmacy down (e.g. Gyms) Food manufacture Home entertainment Most High Street Retail Universities 8
Globalisation: F : Forces f for D Disintegration and In Integration Di Disint ntegrat ation Integration In o Collapse of travel, tourism & aviation o Big Data Companies o Supply Chain disruption | onshoring o 5G – New global standards o Protectionism and National Security o Scientific cooperation o Weakness of WTO o Shared cultural experiences | Netflix o Splinternet o Improved conferencing Populist nationalism Virtual education o o New Cold War | China – USA Easier payments and transfers o o EU/Eurozone non-cooperation IMF response o o 9
The S State R Returns Bigger r state (being pulled out) Safety net for unemployed Libertarian Rescue for reaction companies The St The State Return rns (Lege (L gend nd) Fiscal/Public Some The The debt nationalisation St State Return urns Regulation of Lockdown rules Weaker r state big cos. (being pulled in) Less privacy Border control 10
Trends i in d debt – National d debt and p public sector d debt 11
National p policy r responses t to p pandemic Spending Austerity (Fiscal policy) Fiscal P Policy Sell Bonds Debt & Service Growth Tax loss (Monetisation)? Exchange Rate Inflation QE Long Rates Buy Bonds Monetary Policy Monetary P Policy Bank rates Short Rates 12
Recommend
More recommend
