Crisis: Overall global risk?

BY: Bernard Otabil
The pandemic has disrupted societies, and brought about global uncertainties of extreme proportion.

The return of COVID-19 related stories to headline news in the past two weeks underscores the long held view that the coronavirus outbreak of the past two years, which has assumed pandemic status, would be with us for a long time to come. Yes, and we must learn to live with it. 

 “Omicron [the name given to the newly discovered variant] has an unprecedented number of spike mutations, some of which are concerning for their potential impact on the trajectory of the pandemic,” the World Health Organisation (WHO) said in a statement on November 26.

“The overall global risk related to the new variant … is assessed as very high.” That, in effect, signals the need for everyone to be cautious about the global economic trajectory in general, going into 2022. After all, the obvious health issues, as COVID-19 is, have had the effect of always entwining and exacerbating pre-existing social and economic issues.

The early signs are not good either. On November 29 for example, the prime minister of Japan, Fumio Kishida, said he was barring all foreign arrivals over the new variant, to take effect on November 30.

“We are taking measures with a strong sense of crisis,” he said. Japan currently has more than 76 per cent of the population fully vaccinated, and is planning to aggressively move ahead to administer booster shots this month.

Even though there isn’t enough data to support claims that the new variant could be “vaccine resistant”, and could cause more infected people to be ill, financial market analysts are still wary, and seem to have applied the worst case scenario to model the path of future growth projections- and the market.

Consequently, financial markets took a heavy knock on Friday, November 26 following reports that the new strain of the coronavirus was likely to ignite the health, social and economic turmoil that were experienced any time the pandemic took a surge in the number of infected persons.

The possible fourth wave, as it has been described, forced investors to panic, selling off shares, which forced strong, liquid and vibrant stock markets to plunge in the week ending November 28.

According to analysts and market watchers, the FTSE suffered its biggest one-day fall since June 2020, when the pandemic was in its first phase. In monetary terms, it was estimated that more than £70 billion in value was lost through the sell-off, triggered by the fear that the newly discovered coronavirus variant could usher in a fresh wave of restrictions to control the pandemic.
On the whole, the restriction itself is seen as good in the fight against the virus, however, the unintended consequences are where the problem lies.

The commodity market also experienced severe disruptions, with reports that in the oil sector for example, the benchmark Brent crude oil tumbled by more than 10 per cent in early trading.

Both the stock and commodity markets recovered, somewhat, at the start of the week beginning November 29, but not until it had caused recalibration of global growth estimates. Will this change the narrative about the global economic recovery story?

Well, the early signs are that if governments impose restrictions that could hurt the real sectors of the economy very hard, then the recovery process would be affected negatively. Obviously!

Already, travel associations in Europe and other parts of the world have kicked against newly introduced travel bans by governments, and other measures introduced to curb the spread of the new variant.

In the UK for example, prime minister Boris Johnson’s newly introduced travel ban, that affects about 10 countries, with the hint that more would be added, and the mandatory second-day –of- arrival PCR tests for foreign arrivals, are attracting considerable push back; industry players are concerned that the measures could further harm an already battered sector due to the virus.

The hospitality industry was one area that experienced severe disruption in business processes and supply chain at the peak of the pandemic. The lockdown, which forced airlines and other players within the hospitality space to grind to a halt, affected incomes, employment and households adversely.

The hospitality industry is yet to recover from the lost time, and since many of the firms engaged in it are yet to take off, any further restrictions introduced as a result of this new wave, are likely to severely impair the little progress so far made.

Despite all the gloom about the COVID-19 story, this is not the time to lose hope. Of course not. Remember at all times that our generation is the “age of disruption”, which means that the COVID-19 story only serves as a reminder that your job is to find solutions to all problems, no matter how daunting they may appear.

Well, to put it into proper context, consider the disruption arising from technological innovation, which have, more or less, caused a shift in business processes and flow models that had been applied for centuries.

Who would have thought, during the industrial revolution [several decades back], that there would be a time when semblance of competition issues between financial technology companies, telecommunication companies and banks, would dominate discussions in the financial press and academia? In fact, these are facts that l have written about in this column in the past, but with the narrative the same, it bears repeating.

The pandemic has disrupted societies, and brought about global uncertainties of extreme proportion. A deep sense of reflection on current happenings would point you to industries that are likely to maintain the “new normal”, occasioned by the new ways that have to be adopted because of the pandemic.

The pandemic is one of those situations that prove that even when you adopt a “meta- statistics” approach by aggregating predictions from different models, you will still not be able to cater for all risks.

It shows the level of uncertainties in the world we live in, and how we cannot always, with precision, predict what will happen tomorrow. For this reason, the human spirit always knows how to adapt.

If you pause and reflect, you will also see how the pandemic increased technology adoption in most industries. It forced many companies to adopt and adapt to new, and flexible ways of working.

In the field of education, many institutions are now using online channels to replace face-to-face contact hours between instructors and students, to achieve the same results and impact. Same results, new models.

Disruptive situations only stretch our imagination and force us to become better at what we know and do. The proof of this is with the vaccine companies, during this coronavirus era.
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