• We think the crisis will deepen the schism between China and the US. Last week the US suspended its support for the World Health Organization, which is a United Nations body. It is now (unofficially) claiming the virus is man made and developed in a lab in Wuhan. There were similar claims made by people in China about the US. Things do not look pretty. Across Europe there have been attacks on 5G installations being set up by Huawei. Many European countries are saying they will block any future M&A by Chinese companies trying to buy European businesses at a discount. I think so far, President Trump has been pragmatic on China and has been fending off the hawks led by the Vice President. Till last month, I thought the situation will never go fully into cold war style confrontation. I think COVID has changed all that. I suspect the US companies would all be planning actively and seeking support from the governments to pull out of China. Other countries such as Japan have already announced a pull out (click here for an article in Forbes on this topic). Pakistan’s situation is likely to get much more complicated.
• COVID19 has turbo charged the structural trends which were already underway. Most of the wider trends which we are now seeing, were already underway. For example, the shift to digital economy, the move to electronic cash, the decline in fossil fuels, the shift of supply chains away from China, increase in localization, the death of automotive industry etc.
• New Zealand has become an example for dealing with COVID-19 but it is not a normal model. New Zealand only has had 16 deaths. It went into a strict lockdown early on. Australia has also almost managed to control it. However, both are island countries, with relatively sparse populations, allowing natural distancing. American Samoa was the only place which avoided the Spanish Flu as they stopped ships from docking in. I am afraid that each country would want to become a Samoa.
• On the positive side, there has been a lot of attention on IMF’s forecast of global recession in 2020. Many have ignored the 5.7% growth they expect in the global economy in 2021.
We pray for the good health of you and your families.