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Coronavirus Challenges and Opportunities for the World

June 1, 2020 By Mircea Vasiu

The International Monetary Fund (IMF) just revealed that the fiscal measures against COVID-19, put in place in G20 economies exceed $9 trillion. Moreover, the amount is likely to increase moving forward, as challenges posed by the virus outbreak have deep implications to global economic growth. 

Governments went beyond extremes with the fiscal firepower, providing access to loans, equity, and other guarantees to help businesses and populations cope with the coronavirus challenges.

While the total amount looks staggering, the pandemic revealed systemic flaws in the way countries handled economic growth and revealed the problems to face ahead.

Coronavirus Challenges for the World

To start with, the coronavirus pandemic made it obvious that countries need to invest more in their healthcare systems. More robust systems are needed, together with concrete planning on how to allocate funding.

Global value chains that dramatically expanded over the last forty years see a reverse in the tendency. The virus leads to a reduction in international connectivity, changing the way companies will do business in the future.

Cash is no longer viewed as a safe solution to payments. With more and more businesses stimulating online payment solutions, the pandemic may lead to tectonic shifts in digital payments in the years ahead.

Privacy concerns are rising. One way to fight the virus reproduction is to track peoples’ activities and habits – the more info, the better. In the name of health concerns, some legitimate concerns are on the rise as to how technology interacts with privacy.

The gap between the tech sector and the rest of the stock market will likely continue to widen. It is no surprise that FANG companies drag the stock indices higher as their rally is responsible for most of the recent stock market advance. With work from home and e-learning on the rise, a profound shift in consumer behavior will lead to new technology habits as digitalization takes over.

Perhaps the biggest challenge ahead is the one posed by worldwide deflation fears. If Japan is a relevant example of how deflation grips economic growth, then the last two decades in Japan’s economic performance act as a benchmark of what the world faces post the COVID-19 outbreak.

Any reverse in globalization will likely take years to unfold, and in the lack of a vaccine (which also takes years to develop), countries are left to fight the deepest recession in generations. Fiscal stimulus will not go away anytime soon.