4th May 2020
The year 2020 has been inundated with much uncertainty with societal norms and behaviors being altered. The tone at the beginning of which, was set by cross national conflict between Iran and the United States of America in early January 2020, during which the growth of cases linked to the corona virus (COVID19) was undoubtedly on the rise and becoming more a global threat socially and economically.
The resulting impact of the COVID19 epidemic has resulted in the closure of commercial businesses and in most countries a nationwide restriction on movement with the aim of curtailing the spread of the virus.
Most sectors being caught off guard have been reactive, rather than proactive in response to the situation and have sought assistance from governments in order to keep their businesses going during what has become one of the worse economic and social incidences to occur in the modern age.
It is without doubt more apparent that some sectors have a direct impact on the economic outlook of countries. This article highlights the sectors that have been hit hard as a result of the corona virus outbreak and has subsequently added to the decline in the economic outlook globally.
Banking sector
The banking industry has made great progress in adapting products to consumer demands and is one of the main industries that would be required to adapt quickly to the current corona virus outbreak.
The unexpected imposed restrictions on movement resulted in the basic foundation of businesses being tested.
The reduction in sales, inadvertently gave rise to a decline in profits and unfortunately resulted in job losses. The impact of this has seen an increase in businesses and individuals requiring relief in the form of loans and governmental aid to see them through the period of financial difficulty.
In response to the crisis, banks have reacted by waiving fees, increasing credit card limits, and granting mortgage payment holidays and access to fixed saving accounts to those impacted by the economic effect of the virus.
In mitigating this current crisis the banks will have to adapt products to meet consumer requirements and most importantly ensure the safety of their employees and customers.
Ensuring that employees and customers are safe will be at the fore front of business continuation plans implemented by banks, which will see the fast track of digital banking through increased usage of contactless payment and other mediums aimed at reducing face to face contact with consumers.
Banks that are committed to continuing business as usual, preserving profit margins and reassuring anxious customers would benefit from implementing digital solutions as a means of adapting customer experiences and reaching a broader range of clientele.
Oil and gas sector
Restrictions in movement imposed by lockdown has seen an unrivalled decline in the demand for fossil fuels, with nearly all trading activities and movement halted. This has resulted in the decline in air travel, the closure of manufacturing plants and a restriction on vehicular usage which has subsequently had an adverse effect on the industry.
The oil market response has seen a steep decline in oil prices and a surplus glut of oil cargoes, due to an industry that is experiencing a decline in demand for the commodity.
With surplus crude cargoes and with no buyers the inevitable shortage of storage facilities led to crude cargoes being sold at discount rates to alleviate supply glut and in an attempt to recoup financial losses.
Oil price fluctuation is not a new phenomenon in the industry with previous declines being a constant, due to price wars and conflicts that affect demand and supply of the commodity. Notwithstanding it does seem that the current crisis will take longer to recover and it is yet to be determined if oil will exceed the $100 mark in the next five (5) years.
This has a domino effect as countries dependent on oil revenues as a main stream of income would be gravely affected economically.
However the reliance on the commodity ‘oil’ essentially means that the current industry is too important and therefore exploration and productions facilities will still continue, albeit with minimal workforce and highly regulated safety standards, which the industry is already well known for implementing.
The global demand on oil has been ever more exposed and the current crisis may spur countries and organizations to diversify their revenue streams and explore alternative energy sources.
Aviation sector
The aviation industry has grown tremendously over the decades, with destinations being more accessible due to technological advancements in the industry making long haul flights possible and destinations more accessible. People and businesses are linked through air travel.
The current spread of the corona virus has seen countries make decisions to close borders and restrict flight movements as a means of containing the spread of the virus. The decision to restrict flight movements was enforced globally due to the associated risk factor that transmission of the corona virus within airplanes and generally the busy nature of airports pose.
The detrimental effect on the industry has been the massive decline in demand for flights and therefore reduced sales, job losses and airlines going into administration.
The aviation industry is also essential in generating economic growth, creating jobs, facilitating international trade and tourism. Whilst some countries have intervened through bailouts such as the United States of America who have agreed on a $25 billion bailout of the industry others have not been as forthcoming.
With the anticipated projection that air passenger and freight traffic were expected to more than double in the next two decades, the impact of the current pandemic is likely to have a negative effect on the estimation.
Going forward it is important for the industry to rethink its strategy with clearer guidelines on passenger intake. Overall the aviation industry will be exhaustively tested in the coming years and until there is a dynamic shift in social perceptions relating to flying and the prevention of virus spread the aviation industry may be halted for some time.
Hospitality sector
Social distancing has become the new norm, with the hospitality industry having to adapt to accommodate customers in a safe and secure environment.
Most hotels and restaurants have found their premises empty and therefore having to lay off staff due to the inability to pay salaries. This is a reoccurring theme for all industries.
Finding ways of re assuring customers and making enough profit to ensure the business is viable is a balancing act that most owners in the hospitality industry have to resolve.
Conclusion
With the impact of the COVID19 virus still being assessed and yet to be confirmed, the constant has been the global economic decline that has been experienced. With a cure yet to be found it is important that industries adapt measures in a continuously changing environment that ensure safety of employees in a secure environment.
It is inevitable that one day the world will function as it should, but until then it should be remembered that with change comes growth.
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