By: Marina Gamil
Mubasher: Economies have been hit hard by the coronavirus (COVID-19) pandemic, which affected people’s lives, slowed down activity, and disrupted financial markets and supply chains, pushing the world to think of new ways to better face any possible crises in the future.
In its June 2020 Global Economic Prospects, the World Bank expected that the COVID-19 crisis would lead to a 5.2% contraction in the global GDP in 2020, leading to the deepest global recession in decades.
This recession is forecast to drive lower investments, a plunge in human capital, and disruption of global trade and supply linkages.
Hence, the crisis highlights the urgent need for the world to review its economic systems to make them more resilient in the future.
“The pandemic exposed the fragility of the global system. And I think it is time to autocorrect,” the Dean of the School of Business at the American University in Cairo (AUC), Sherif Kamel, said.
Kamel shared his vision over the COVID-19 impact and how the world economies could learn from this crisis during the ‘Future Outlook on the Global Economy’ session, held as part of the RiseUp from Home virtual event, which took place online on 13-15 August 2020.
“Due to the pandemic, strength, weaknesses, agility, and resilience of different economies, whether in developed or developing countries, were all put to the test. The current crisis showed the dire need for a visionary, innovative, and pragmatic approach for the society not just to navigate the crisis, but also to prosper at the end,” Kamel remarked.
During the session, the dean of the AUC School of Business has highlighted three main aspects that the world has to put into consideration during and after the COVID-19 crisis.
Although globalisation has helped the world economy to grow from around 40% in the 1980s to 60% at the beginning of the third decade of the 21st century, COVID-19 has shown its limitations over the past six months amid the suspension of global trade and flights.
Kamel referred that the globalisation model should be transformed into diversification, as countries and firms should boost a more varied domestic production in order not to completely depend on international sources.
The globalisation has strengthened the interdependence among countries and firms, making them vulnerable to crises, including the shocks of the COVID-19 spread all over the world.
“I believe we will witness more signs of de-globalisation, not intended to make us completely independent nor dependent on others but to focus on better planning and management, resilience, self-reliance, and localisation, including partially transitioning to distributed manufacturing models and increasing the diversification aspect in global value chains.”
Hence, establishing a better, more organised, stronger, and fast responding international cooperation network is essential to tackle any problems.
Businesses should have buffers to be able to meet pandemics and problems and mitigate their repercussions.
Previously, businesses and industries have focused on reducing their buffers to maximise efficiency, minimise costs, reduce inventories, and drive-up asset utilization, making them vulnerable to the economic risks over the past six months.
“In the future, there might be a shift from almost zero inventory and a just-in-time approach to a just-in-case mode of operation.”
Technologies, including Artificial Intelligence (AI), big data, and the Internet of Things (IoT), become necessary more than before, namely amid the COVID-19 lockdown and the suspension of flights.
Hence, the pandemic has changed people’s behaviours to adopt digital transformation and invest in innovation.
“The growing enthusiasm for digital transformation represents an opportune moment for NextGen innovative entrepreneurs focused on tech-based and tech-enabled startups that address priority issues across various sectors such as transportation, FinTech, healthcare, logistics, education, retailing, and agriculture,” Kamel noted.
Moreover, the dean of the AUC School of Business expressed his optimism about recovery from the COVID-19 impact, confirming that once the vaccine is released, things will get back to normal.
“The quicker we control the virus and the quicker we have a vaccine, the revival will start earlier and the impact will be less.”