South Korean soldiers wearing protective gear spray disinfectant on the
street to help prevent the spread of the COVID-19 coronavirus, in Seoul
on March 6, 2020. According to the World Health Organization, the
disease has spread to 114 countries so far. PHOTO | FILE | AFP
As the coronavirus pandemic ravages the globe after it emerged
in China just a few months ago, day-to-day life for millions of people
has changed.
Latest data, according to an AFP tally, indicates that there are now more than 124,000 infections across the world with 4,500 deaths.
According
to the World Health Organization, the disease has spread to 114
countries so far. Of these, seven are in sub-Saharan Africa with DR
Congo being the latest country to confirm a case.
As
oil prices plunge and financial markets take a tumble, McKinsey &
Company -- an American business strategy and consulting firm -- has
released a report predicting the likely impact the pandemic will have on
economies and businesses.
According to its research,
there will be three likely scenarios: quick recovery, a global slowdown
and a pandemic-driven recession.
QUICK RECOVERY
In this scenario, McKinsey & Co reckons that if COVID -19 is
to be considered a seasonal illness just like the flu, which it closely
resembles, the effects will be magnified at some point and then
minimise later on.
This will only happen if other
countries are as moderately successful as China has been so far as far
in containing the rise in cases within its borders.
In
this scenario, even as the virus spreads rapidly, most people outside
the transmission hotspots continue with their normal daily lives.
If
this happens, McKinsey sees global GDP growth for 2020 falling from the
previous estimate of about 2.5 per cent to about 2.0 per cent.
"The
US economy recovers by the end of Q1. By that point, China resumes most
of its factory output; but consumer confidence there does not fully
recover until end Q2. These are estimates, based on a particular
scenario. They should not be considered predictions," McKinsey cautions.
GLOBAL SLOWDOWN
In this scenario, most countries will fail to achieve the level of control China has.
"This
scenario sees some spread in Africa, India, and other densely populated
areas, but the transmissibility of the virus declines naturally with
the northern hemisphere spring," McKinsey says.
"This
scenario sees much greater shifts in people’s daily behaviors. This
reaction lasts for six to eight weeks in towns and cities with active
transmission, and three to four weeks in neighboring towns."
In
this case, projected global GDP growth for 2020 is cut in half, to
between 1 per cent and 1.5 per cent, leading to an economic slowdown,
but not a recession.
This would affect small and mid-size companies harder, especially those that rely on China.
Certain sectors, especial tourism and aviation, will suffer the most.
RECESSION
This is the worst case scenario. It assumes that coronavirus is not a seasonal illness, meaning that it's here to stay.
This
will mean that businesses will remain down throughout the year and
result in a recession with noticeable overwhelmed health systems.
"This scenario results in a recession, with global growth in 2020 falling to between –1.5 percent and 0.5 percent."
It
adds: “In consumer goods, the steep drop in consumer demand will likely
mean delayed demand. This has implications for the many consumer
companies and their suppliers that operate on thin working capital
margins.”
WHAT COMPANIES CAN DO
Here is McKinsey's advice on the steps companies can take to protect themselves and their staff.
1. Follow guidelines issued by World Health Organization WHO) and local authorities.
2. Communicate with employees frequently about the illness.
3. Curb non-essential travel.
4. Minimise meetings.
5. Provide information on triggers, progress and threat map.
6. Come up with contingency plans.
7. Stabilise supply chain.
8. Stay close to customers.
9. Define activation protocol for different phases.
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