The novel coronavirus will have a significant impact on the global economy, the regional economy and on the national economy. There are a variety of ways it will affect the economy, including a slow down or complete halt of production activities, restrictions in the movement of people to work and to places of socialisation and debilitating supply chains.
As concerns the energy markets, prices have toppled on account of a rare combination of demand and supply shocks. The market was already contracting on account of the coronavirus and then there is now the oil price war as Saudi Arabia chartered more than 30 crude supertankers to export oil in the coming weeks to the big refiners of Russian oil, in Europe and Asia. The problem is getting possibly so acute that Goldman Sachs (March 2020) has forecast that the market could be thrown into imbalance by as much as 6 million barrels of oil per day.
The table at right shows the imports of manufactured intermediate products by T&T from some of the countries most affected by the corona virus. All the listed countries (except perhaps France) are important source countries for this country’s intermediate manufacturing goods. Thus, when these countries are slowed down by the virus, T&T’s imports of intermediate goods would also be affected and this in turn will force the economy, especially those sectors that depend on these type of intermediate manufacturing products, to slowdown.
Impact on foreign direct investment (FDI)
From a narrow investment perspective, it is likely that FDI will flow the least into countries that have been badly hit by the virus. Overall, the UNCTAD (March 2020) indicates that it expects world FDI flows to decrease between 5 per cent and 15 per cent dependent on the duration of the virus globally. Those MNCs that experience a decline in production or stop production will invest less or not invest at all. Greenfield projects that are ongoing though will likely continue and it is possible that investments that have a long-life cycle will go ahead but for the present at a slower pace. Mergers and acquisitions will likely decrease as the uncertainty of the current environment will slow the pace at which those type of economic activities, progress.
FDI to resource abundant economies like TT will proceed but at a much slower pace as investors in the developed world assess the situation in destination economies. At the same time though, the sharp fall in profits of existing MNCs will slow their reinvestment capacity in host economies. Already note that BPTT has closed its office in T&T for a month.
Impact on tourism
In the context of the coronavirus, the global tourism industry will take a hit. The World Travel and Tourism Outlook has indicated that up to 50 million jobs could be lost globally because of the pandemic. With the rapid spread of the virus, thousands of international flights have been cancelled and indeed some insurance companies have suspended travel cover for new customers. The World Travel and Tourism Council has gone so far as to suggest that the travel sector in 2020 could decline by as much as 25 per cent (if the pandemic continues, it can even be more). Some airlines such as British Airways and EasyJet have cut flights. Further, several cruise liners which include Viking Cruises, Saga, The Scenic Group, Royal Caribbean, Norwegian Cruises and Carnival’s Princess have suspended cruises. Other airlines around the world such as Singapore Air, Qatar Airways, Air Canada, Air India and American Airlines have suspended flights and given waivers to passengers with bookings amidst the COVID-19 pandemic.
The way forward
In this type of environment and if the COVID-19 does not fade away until perhaps later in the year, it means that a sort of emergency economic development planning or crisis or disaster economic planning would have to set in. The HSF would have to be looked upon as a source of funds, multilateral support will have to be looked at as a source of funds and indigenous economic activity would have to increase.
In this type of setting national food security takes on a distinct and heightened level of importance. Ours is an economy where employment and agricultural output has been persistently declining. But this is an emergency and so we need to think quick and deep. In this regard, I am imploring the state to enhance national food security IMMEDIATELY by deploying the army and by reaching out to farmers, where they can. We need to be planting more in our backyard, certainly our cucumber, pumpkin, melongene, cassava, yam, dasheen etc. Planting should be promoted now. This is not business as usual. The pandemic will test the fabric of our country in many ways. The little money in the HSF will be drawn upon as needed for food and medicine, but at the same time, let good sense prevail and let’s increase domestic food security as quickly as we can.