How is Work and Business Abroad Impacted by Coronavirus?
WWC - Coping with Coronavirus
IN THIS SERIES OF ARTICLES TO HELP EXPATS DEAL WITH CORONAVIRUS, PROACT SAM EXPLORES HOW EXPATS CAN PROTECT THEMSELVES AND EXPLOIT OPPORTUNITIES PRESENTED BY THE PANDEMIC.
Part 8 - How is Work and Business Abroad Impacted by Coronavirus?
ProACT Sam with a first world perspective of the impact of the economic shutdown on Business and Employees.
Global impact of coronavirus on the economy
A recession is defined as 2 quarters of falling economic growth. There is no way for the world economy to be in anything but full recession in 2020.
It may not run as long as the Great Depression of the 30’s, or have the severe socio-economic impact of the the collapse of the Soviet Union in the 90’s or the population decline of the Irish potato famine of 1845. It could be as bad as the Greek Cyprus Financial crunch of 2013.
The economic lockdown may last 3 weeks or 3 months. The economy doesn’t stop, but large chunks of it do. As a large proportion of businesses are shut down, they don’t get the cashflow to pay employees, and in turn employees and businesses can no longer act as consumers to provide the cashflow to make the wheels keep turning.
The economy will take longer than 3 months to restore to health after lockdown, so a challenging 2020 remains on the road ahead. Having spent savings and reserves to get through the lockdown, families and businesses may then be cautiously mindful of building reserves back up before gradually regaining confidence as consumers.
How people will react in the economy is unknown to a large degree. We have recent historical reference after World Wars. How the world economy emerges will in large part come down to the government actions.
Finance during economic crisis
During an economic crisis such as war, inflation or finance, how governments react is key. In the 30’s it is widely believed that central banks were too cautious, starving the world economy of cash and that there was not enough money to help the world go around.
The great depression of the 30’s was characterised by large levels of business bankruptcies, foreclosures on loans and unemployment. In the end, it’s down to the impact the economic repercussions have on people. Death rates can rise as nutrition and food become harder to get hold of. Even in the 1990’s, Russia’s rising levels of economic hardship saw a rapid rise in death and mortality with falling population numbers.
And that was without a deadly virus to stir things up.
WWC - Coping With Corona has started well, with (at least in Europe, USA and other wealth nations), massive state and central bank funding being prepared to help maintain business and jobs for the period of lockdown.
If governments can keep the banks alive, keep jobs open, keep money in the pockets of businesses and employees, then there is hope of a quicker economic recovery, with less economic deaths and social unrest or collapse.
GOVERNMENT SUPPORT TO CONSUMERS
There are number of different schemes in wealthy countries.
SOCIAL INSURANCE if you have paid Social Insurance through your job and become unemployed, or closed your business, then enhanced unemployment benefits are available to provide income during the lockdown until you are back in work. There could be additional living allowances available depending upon the circumstances of your country and family.
FURLOUGH scheme: This process is the government’s job retention scheme and depends upon a business employer making an application for its employees to be retained on this basis. The employees don’t work, and get paid up to 80% of salary through the employer which is paid for by government funding. Only a business can apply to put its employees through this process to retain jobs.
GRANTS & LOANS Some businesses qualify for additional one off grants or government guaranteed loans to provide additional cash to see them through this period.
PAYMENT DEFERRALS Banks and mortgage lenders are being encouraged to give payment holidays to borrowers. This means cash is left in consumers pockets, potentially providing cashflow spending power to families and businesses in the year ahead
Contact us at ProACT Know How to assist your Expat family and business and identify what support is available to you during WWC and the recovery period.
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