By Jim Dudlicek, Director of Communications and External Affairs
How badly will the economy of your community be affected by COVID-19?
Financial experts explained how a post-pandemic economy might look, depending on a number of factors that have yet to transpire. “The world is going to look very different from how it did in the past,” said Dr. Daniel Bachman, U.S. economist at Deloitte, joined by colleague Josh Mellinger, Deloitte’s fresh supply chain leader, in a June 3 webinar hosted by the National Grocers Association.
Bachman reviewed several scenarios for how the country’s post-COVID recovery might play out, within a framework of five key sources of uncertainty felt by consumers and the business community: outcome of the disease and the medical response; size and length of economic closings; reaction of the global financial system; response and recovery in other countries; and the level of trust people have in the political and economic system.
The result, Bachman cautioned, will depend on a host of unknowns, with the medical response to the coronavirus topping the list.
Here are some key takeaways from this discussion:
Three paths to recovery: Bachman outlined three scenarios by which the currently struggling economy could return to 2019 levels of gross domestic product. The most likely path, with a 70% probability as determined by Deloitte analysts, is “baseline,” which predicts recovery by Q4 of 2023. This path assumes some sort of virus recurrence in the fall. “We think there will be another decline in GDP in the fourth quarter and slow growth through mid-2021,” Bachmann said, “by which time a vaccine or other medical solution will inspire confidence.” A V-shape “fast bounce-back” would restore 2019 GDP levels in 2022, but with a 5% probability is “overly optimistic, even with positive medical outcomes.” Deloitte analysts calculate a 25% chance for the “no end in sight” scenario, in which lagging efforts toward a vaccine or other treatments would lead to frequent outbreaks, additional business shutdowns and restoration of GDP sometime beyond 2025, what Bachmann called “extremely dismal … but unfortunately this is a possibility.”
The retailer-consumer relationship is changed forever: What you sell will not be as much about the product itself as it will be about how it’s handled, Mellinger said. Trends that were emerging before the pandemic – safer products, healthier products, local products, transparency – have taken a leap forward: “We’ve seen five years’ worth of trends come true in just a couple months.” Additionally, new shopping habits that emerged with sheltering in place give grocers “a chance to drive SKUs back down to a normal place,” Mellinger said.
Higher cost, lower productivity: What will happen in the long term? “The economy is going to look very different,” Bachman said, predicting a move toward deglobalization. This would mean fewer imports, less trade, more internal sourcing “and probably more expense.”
Success hinges on trust: “Ultimately, recovery depends on people trusting they will be safe,” Bachmann said, within four dimensions of trust: safe physical space, safeguarded emotional and societal needs, secure information, and financial needs being served. “Organizations that will be successful are those that get the trust of all their stakeholders.”
To view this complete webinar and others in the series, visit: https://nga.sclivelearningcenter.com/MVSite/default.aspx
