THE E ECONOMY A AFTER CO CORONA RECOVERY O OR IN INTENSIV - - PowerPoint PPT Presentation

THE E ECONOMY A AFTER CO CORONA RECOVERY O OR IN INTENSIV IVE C CARE?

Professor Sir Vince Cable

Ag Agenda

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Great Economic Disasters Profiles of Recovery Depression and Recovery Causalities and Opportunities for Business Globalisation: Forces for Disintegration and Integration The State Returns Trends in debt National policy responses to pandemic

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%

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Profiles o

• f

Re Recovery

Fou

• ur

r prof

• files: V |

| U | | W | | L

V Rapid recovery Trace and test Strong government/social cohesion Korea, Taiwan, Germany, now China U gradual recovery rolling lockdowns until vaccine slow supply chain/inventory/finance adjustment 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

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• 50
• 40
• 30
• 20
• 10

10 20 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

% BE % BELOW TR W TREND ND TIME TIME PE PERIO IODS DS

Pr Prof

• files of reco

les of recover ery t y to 2

• 2022

V U W L

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Profiles o

• f r

recovery t to 2 2020

• Lockdown lifted
• Government rescue
• Government stimulus
• International coordination
• China/East Asia lead
• ‘Roaring twenties’ again

Depression

• Mass unemployment (10% +)
• Destruction of SMEs
• Collapse of consumption
• Collapse of business investment
• Chronic uncertainty
• Policy failures: USA; Eurozone

Recovery

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Depression a and R Recovery

Casualties a and O Opportunities f for Business 1 1/2

Casualties (general)

• Cash poor
• Small
• Face-to-face (customer)
• Staff contact
• Conservative/Analogue

Opportunities (general)

• Cash rich
• Big
• E-commerce
• Remote working
• Innovative/Digital

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Casualties a and O Opportunities f for Business 2 2/2

Casualties (sectoral) Opportunities (sectoral)

Supermarkets Farming Tech companies Bio-science IT services Ed-tech Online retail & services Computer games & animation Logistics & delivery Pharmacy Food manufacture Home entertainment Hospitality

(Hotels; Restaurants; Conferences)

Property

(Commercial; Estate Agents)

Spectator Events Cultural Travel & Tourism

(Airlines; Public Transport; Cruises)

Most manufacture Some construction (50%) Leisure

(e.g. Gyms)

Oil; Upstream and down Most High Street Retail Universities 8

Globalisation: F : Forces f for D Disintegration and In Integration

Di Disint ntegrat ation

• Collapse of travel, tourism & aviation
• Supply Chain disruption | onshoring
• Protectionism and National Security
• Weakness of WTO
• Splinternet
• Populist nationalism
• New Cold War | China – USA
• EU/Eurozone non-cooperation

In Integration

• Big Data Companies
• 5G – New global standards
• Scientific cooperation
• Shared cultural experiences | Netflix
• Improved conferencing
• Virtual education
• Easier payments and transfers
• IMF response

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The S State R Returns

The The St State Return urns

Safety net for unemployed Rescue for companies Some nationalisation Lockdown rules Border control Less privacy Regulation of big cos. Fiscal/Public debt Libertarian reaction

The The St State Return rns (L (Lege gend nd)

Bigger r state (being pulled out) Weaker r state (being pulled in)

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Trends i in d debt – National d debt and p public sector d debt

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National p policy r responses t to p pandemic

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Fiscal P Policy Monetary P Policy

Spending Tax loss QE Bank rates Sell Bonds Buy Bonds

(Monetisation)?

Debt & Service Long Rates Short Rates Austerity Growth Exchange Rate Inflation Monetary Policy

(Fiscal policy)