The Corona crisis: risks and opportunities
As the Covid-19 virus spreads across the world, commentators sketch a dark picture that in the short to medium term includes an economic depression and a long-predicted 3D scenario (deglobalisation, de-dollarisation and depopulation). In the long term, others see an opportunity to increase the pace at which the world can reach certain goals, for example carbon-free energy production.
Large parts of the world appear to have come to a sudden halt. Most countries have by now imposed travel restrictions in an attempt to contain the spread of the virus. The US will, for 30 days starting from 13 March, not admit foreigners who were physically present in the Schengen Area. The EU banned the “non-essential” entry of all foreign nationals. Individual countries in the EU have also decided to unilaterally close their borders. In Germany, border control officers will conduct checks and turn away anyone traveling without a valid reason, unless they are a German citizen or resident.
European countries are divided about the best approach to deal with the virus. While the Netherlands seems to have opted for the controversial herd-immunity approach, initially also considered by the UK but later discarded due the risks involved, Italy and France opt for a full lockdown. In France, inhabitants will have to remain at home for two weeks and will be punished when breaking this order. France is also among the countries that go furthest in supporting its inhabitants by suspending the payment of utility bills and rent payments during the lockdown. By not sufficiently building immunity, these countries may later be hit by a second wave of the virus and they therefore essentially count on a virus being available in the foreseeable future. Under the most optimistic scenario, however, a virus will only be available by the end of 2021.
The choice for a lockdown is also dependent on countries’ preparedness to deal with a pandemic. The US is notoriously ill-prepared for this kind of event compared to countries with strong social welfare and universal health systems, meaning that Americans who need care or social distancing will continue their normal activities and will thus continue spreading the virus.
Little can be said at the moment about the long-term economic impact of the virus. What we may expect, however, is an acceleration of events in areas such as the energy production and consumption. Commentators have warned for a long time about the risk of “stranded assets”: in order to meet the goals as laid down in initiatives such as the Green Deal, large oil, gas and coal reserves should remain unused; the value of investments in companies that rely on fossil fuels may suddenly drop if this risk were priced in. From that perspective, the Covid-19 virus can be a decisive push towards decarbonizing investment portfolios. Following this line of reasoning, it also means that financial help to sectors that are suffering the most from the pandemic, such as aviation, should not be bailed out. They can stay in business by borrowing at rock-bottom rates, using their assets as collateral, and under the condition of collaborating towards sustainability.
Edited by: Dr. Olivier Vonk