Miroslav Prodan: “Which business will benefit and which will lose from the coronavirus pandemic”
Uncertainty and panic impact on the business significantly. The biggest challenge lies on restrictive measures to stop the spread of the virus. However, even there are both winners and losers.
Coronavirus affected almost all economy areas. Due to quarantine, factories and factories were temporarily closed in China, and industrial production in January-February fell by 13.5%. Large automakers are forced to limit and close production. The tourism and event industries suffered more than others. According to the World Travel and Tourism Council, the coronavirus pandemic could lead to the cancellation of 50 million jobs. Due to international restrictions, borders are closed and public transport cancelled. The transport industry suffered substantial losses. The fall in demand for transport, the flights cancellation and the decrease in energy consumption led to a drop in oil demand, which caused significant harm to the energy sector.
Any crisis leads to savings, consumption limits, and the measures of social distance. These measures are introduced in most countries worldwide, and led to a halt or significant limitation of classical trade. Even large producers are forced to fire their workers or change their work schedules. A similar situation is in the service sector; since most catering and service establishments are closed or restricted their activities.
At the same time, there are a number of business areas that won. Manufacturers of pharmaceutical and hygiene products, online stores and delivery services benefited the most from the pandemic. No one has benefited from the current situation like the Zoom video service. Sales and stock prices in 2020 increased by more than 50%. Coronavirus made a positive impact on the online entertainment industry.
First of all, the crisis activates the M&A sector. This will lead to a redistribution of property. More successful companies will absorb less successful ones. Modern mergers and acquisitions will optimize the activities of market participants, although they can become one of the factors in the growth of unemployment.
Long quarantine can lead to an increase in the debts of both private households and companies, which will automatically lead to rise the number of bankruptcies, and thus negatively affect the banking sector development. That is why it is very important now to carry out all actions aimed at supporting private companies and citizens.
According to the forecasts of world experts, a decrease in industrial production will be observed. Countries will purchase less Ukrainian steel. Despite the gradual recovery of China, it will be possible to reach 2019 export figures. Prices for the second important commodity of our export – grain – will also fall. This is primarily due to falling prices for oil and other commodities. Foreign companies can reduce purchases or focus on national producers thanks to the protectionist measures of the governments of developed states. It is the agricultural sector this year that can become the flagship of the Ukrainian economy. At the same time, the growth of export of agricultural products can be dangerous for the state, therefore, in modern conditions, a comprehensive program should be developed for the formation of state and regional reserves of agricultural products so that in the beginning of winter there is no danger of starvation.
In the context of the economic crisis, investors around the world will try to keep money in quiet harbors, rather than in too risky Ukrainian markets. Under such conditions, the Ukrainian government should pay attention to the unused opportunities of domestic investment in markets, however, not by restricting the movement of Ukrainian citizens, but by attracting temporarily free workers to the implementation of large infrastructure facilities.
An important factor in stabilizing the economic situation by coordinated program of cooperation between Ukraine and the IMF, which will not only be an indicator of financial stability in the state and confirmation of the contractility of our country. The IMF program – should be a key element now in the state strategy due to the fact that we are unable to finance the budget deficit from the market and unable to pay off debts. In addition, receiving borrowed funds from the IMF will open Ukraine access to other programs and tools to support the Ukrainian economy.
Today, Ukraine has a chance to prepare for possible negative trends in the global economy development and optimize both home production and foreign trade. Only do all this as soon as possible.