AS the pandemic continues to cut a path of economic and health destruction around the world, the reactions of some people are nothing less than astonishing. There are those in the Philippines that seem to take great delight in pointing out the failures of coping with the disease in the United States.
This is like laughing at your next-door neighbor’s house on fire while foolishly giving little or no thought about the fact that yours also will soon be burning. The annihilation of global trade and international tourism is going to affect every nation on the planet.
The economic output of the US in 2019 was $21 trillion, followed by the European Union at $19 trillion. China was at a distant third at $15 trillion. When you compare GDP per capita even considering Purchasing Power, China is ranked number 78, below Thailand, Argentina, and just above Libya. The US by far has the single largest consumer market of any country, representing over 26 percent of the entire global consumer market.
The mouse may be happy to see the elephant fall down but is unlikely to avoid being crushed.
Global trade is the best indicator of the world’s economic activity, and a good way to measure it is the cost of transporting raw materials and goods from one place to another. The Baltic Dry Index (BDIY) is a composite index for the cost of dry bulk shipping as well as a general shipping market bellwether. An eight-year low price was hit at around $500 at the beginning of February as the virus was spreading. It is now up 73 percent year-to-date at about $1,900. That is at least a short term positive. But is it sustainable?
If you want a reasonably unbiased forecast, the best person—or entity—to ask is someone who has a great deal of financial skin in the game. If they are not trying to protect their own interests—or want to sell you something—these people can be helpful. But the analysis must be both broad enough to take into account many factors and specific enough to be useful.
The World Economic Forum in May surveyed 347 global senior risk analysts whose only job is to protect their public and private organization from bad things happening. It was an “Eighteen-Month View of a Post-Covid World.”
Perhaps obviously the greatest concern is a “Prolonged Global Economic Recession.” The least concern was the “Exacerbation of Long-Standing Military Conflicts.” But those extremes also had to do with the likelihood of either event happening. A long economic slowdown was given a high 69 percent probability. An increase in “war” was rated at only 2.3 percent.
Interesting also was that since the end of 2019, there has been a surge in cyber-attacks on companies and governments, which became the top technological concern moving forward for 38 percent of those surveyed.
When you move past broad economic issues like recession, bankruptcy, and high unemployment, with a 48 percent probability is “More Restrictive International Travel/Trade Movement.” Then it must be asked, are travel, tourism, hospitality and entertainment fundamentally altered in nature and delivery?
These results are not earth-shattering as all of them are common sense worries. However, considering that this was a geographic and industry balanced survey, it does substantiate the fact that we are all in the same boat. Is the future going to be “every man for himself”? Or are nations going to work together?