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Global economy: Tightrope walk to recovery

Experts are one in saying that government support to help people and business in the hard-hit sectors will need to evolve but to remain substantial.




For those expecting a return to normal when this pandemic is all over, brace yourselves.

There will be no return to the good old days. This is never more true in business where that deadly unseen virus has wrought havoc in most establishments across the country.

The pandemic has sped up the shift to online shopping such that most physical stores have shut down. E-commerce has never had it so good with the advent of the health crisis. People, on account of the pandemic, have shied away from malls and most retail stores.

It is estimated that more stores will close in the next five years with or without the pandemic. Experts see more stores being used to fill up online delivery and curbside pickup orders as e-commerce booms.

The apparel, consumer electronics, home furnishings and sporting goods sectors will close the highest number of stores during that stretch, the analysts project. They believe the number of malls will also decline over the next five years.

A global firm providing financial services in over 50 countries says e-commerce sales grew from 14 percent of total retail sales in 2019 to 18 percent in 2020. it expects them to grow to 27 percent of retail sales by 2026.

In a worst-case scenario, if e-commerce sales increase to 30 percent of retail sales by 2026, nearly 150,000 stores may close, the analysts said.

Not every type of store will be hurt as badly by growth in e-commerce, however. Closures in the grocery, home improvement and auto parts sectors will be “modest,” the analysts predict. This is because online shopping is less prevalent for these goods.

Last year, global economic activity all but ground to a halt as government-imposed lockdowns took a particularly heavy toll on the world’s service industry.

The outbreak, which has infected millions and killed hundreds of thousands, has also crippled manufacturing, shutting factories and upending supply chains.

As restaurants, bars and other leisure options closed, holidays canceled and travel restricted, the situation in the services industry was similarly dire.

To try and support economies reeling from the coronavirus pandemic, governments and central banks around the world have unleashed unprecedented amounts of fiscal and monetary support.

Experts are one in saying that the global economy faces a tightrope walk to recovery.

As restrictions begin to ease, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections. Strengthening health care systems and supporting people and businesses to help adapt to a post-Covid world will be crucial, they say.

The containment measures brought in by most governments were necessary to slow the spread of the virus and limit the death toll, but they have also closed down business activity in many sectors and caused widespread economic hardship.

With a second wave of infections now triggering a return to lockdowns in most parts of the world, world economic output is forecast to plummet first, before climbing back 2.8 percent this year. At its peak, unemployment in most economies would be more than double the rate prior to the outbreaks, with little recovery in jobs this year.

In the light of all these grim scenarios, experts are one in saying that government support to help people and business in the hard-hit sectors will need to evolve but to remain substantial.

Governments, they opined, must seize this opportunity to build a fairer economy, making competition and regulation smarter, modernizing taxes, government spending and social protection.

“Prosperity comes from dialogue and cooperation. This holds true at the national and global level,” they said.

They also called for stronger international cooperation to help end the pandemic more quickly, speed up the economic recovery, and avoid harming the catch-up process of emerging market economies and developing countries. They also argued for encouraging more resilient supply chains, including larger holdings of stocks and more diversification of sources locally and internationally.