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How COVID-19 will change the global business climate?

“COVID-19 is threatening livelihoods as well as lives. Our cover this week examines the disaster the disease is unleashing in the business world. Countries accounting for more than half of global GDP are in lockdown. The International Labour Organisation estimates that industries in which the risk of lay-offs or furloughs is high employ 1.25bn people. The exit from lockdowns will be halting and precarious. And the calamity will have lasting effects, accelerating existing trends: the adoption of new technology; a rethinking of global supply chains; and the rise of well-connected oligopolies. Big companies are better placed not only to survive the crisis but to tap governments for support. At least banks are entering this crisis in far better shape than the last one. Some may struggle nonetheless. Amid the extraordinary turbulence the pandemic has caused in financial markets, the plunge in oil prices stands out. They fell by more than half in March, as demand collapsed and a price war raged between Saudi Arabia and Russia (on April 9th OPEC and Russia made a truce and agreed to cut production, but prices fell nonetheless). The Russians and (especially) the Saudis can withstand low prices, but other producers are hurting. Those include shale firms in America, the world’s biggest producer, but also poorer oil-dependent countries, such as Iraq. Oil provides 90% of Iraq’s state revenue. Even a doubling of its price would still leave a wide budget deficit. Iraq’s cash reserves may not last the year. And as if near-bankruptcy were not enough to contend with, its politics are in chaos and militias are running amok.”

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Source: economist

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