COVID-19 | Economic Impact of the Coronavirus

James Pearcy-Caldwell Europe, QROPS, Tax

COVID-19 economic impact

The coronavirus pandemic is clearly a critical health issue, but the COVID-19 economic impact cannot be overlooked. The methodology employed by countries, with systematic shutdown of travel across Europe, the USA and some Asian countries, will not be easy to reverse. When will be a right time to re-open borders?

Isolated suppression policies are, in effect, a “whack-a-mole” scenario where eradicating the virus in one area or country will be replaced by it rising in another area.

This is unlikely to be successful.

Countries succeeding in suppressing COVID-19 have no exit strategy.

Finding a scientific solution in order to speedily identify who is contagious is essential, as against untargeted nationalistic border closures. Until this is the case, and targeted quarantine is possible, borders are unlikely to be re-opened or at a minimum partially re-opened.

The COVID-19 Economic Impact

Most countries in mainland Europe have not, as yet, provided sufficient state support for private business, and some are providing none. Therefore, perfectly viable private businesses in many countries, especially businesses with high borrowings, will either default on debt, increase debt or run out of money if a lockdown continues for any time. For many, the initial impact estimates range between 4 weeks to 12 weeks, and this will be critical for future analysis.

These estimates are based on the concept of returning to normal. Unless the coronavirus is found to be suppressed through weather variations, or there is a quick easy way of identifying and isolating people with COVID-19, then normality is unlikely to return in 2020. In a worst-case scenario, we can expect countries who have previously contained the virus will have to repeat the process including periods of lockdown in areas.

Private Business

In this case debt laden private businesses in certain segments, being to do with travel and leisure, are unlikely to survive through to the end of 2020. There are other businesses that will be in similar positions that have nothing to do with leisure or travel. For example, property and associated business is likely to be badly affected for some time. New developments, buying and renting out of properties both for failed business, as well as individual everyday living, will be affected; companies such as Airbnb, reality /estate agents, developers and landlords should all anticipate severe downturns.

This will not be limited to a single country, and we would anticipate that the areas affected will be across sectors in multiple countries.

More information

For more information on the COVID-19 economic impact and its possible corporate winners, please go to the full article at TailorMade Pensions.

For more information see our next article on the Markets and Countries impact under COVID-19 – Coronavirus.

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was republished on 26th March 2020