An asymmetric economic recovery

The economic recovery will not be the same for everyone, so we must analyse what challenges and opportunities are on the horizon and how we should position ourselves.

The confinements of the population that have been taking place as a consequence of avoiding a health catastrophe in most countries have caused an unprecedented economic tsunami that has affected the entire planet at the same time. This tsunami, like the natural phenomenon to which it refers, has, once it has passed, generated absolutely devastating effects on the economic landscape.

During the first half of 2020, it was not possible to make forecasts that had a modicum of sanity. However, once we have entered the second half of the year, the effects have been revealed and it is beginning to be possible to glimpse what the consequences might be and what measures to start taking with a better chance of success.

At this point, the big question on everyone’s mind is when and how the long-awaited recovery will come about.

Experts in strategic macroeconomic analysis have put forward different possible scenarios, predicting whether the recovery will be “V” shaped, “U” shaped, “L” shaped, and even JPMorgan has ventured to say that the recovery could be “K” shaped.

What seems clear, regardless of which shape is finally drawn, is that the recovery will not be the same, nor will it occur at the same speed for everyone. Therefore, what we can say with a certain degree of certainty is that the long-awaited economic recovery will most probably be ASYMMETRIC.

In the financial crisis we experienced as a result of the 2008 crash, both the effects of the crisis and the recovery were also global, i.e. they affected most of the world’s economies. However, it was characterised by its asynchrony, i.e. both the fall and the recovery occurred at different speeds.

In particular, the effects of the financial crisis in Europe and the US were very deep and the recovery was very slow. However, in the case of China and the Asian region, the effects were less severe, as they were able to activate their domestic demand and, consequently, the speed of recovery was much faster.

The current crisis seems to be different and its characteristic, although it will certainly have shades of asynchrony, is likely to stand out for its asymmetry. And we speak of an ASYMMETRICAL global recovery because there will be important differences both in the way it is managed and in the sectors and types of companies it will affect.

There are different ways in which countries have managed the pandemic crisis, which has led to different levels of decline in economic activity. Some countries will be better positioned to recover from a much smaller fall in Gross Domestic Product and a much smaller increase in Public Debt.

On the other hand, domestic demand is a catalyst for growth and, in this sense, the weakness of domestic demand is not the same in the different continents, which will mean that the recovery of Asian markets will be much faster than that of the rest of the countries.

The models for boosting activity with which governments are trying to reactivate the economy are divided into two different modalities. On the one hand, there are the countries that promote the Keynesian model of increasing public spending and, on the other hand, there are the more neoliberal countries that use the reduction of obstacles to entrepreneurship as an accelerator of activity, making domestic regulations more lax.

Another differentiating factor will be the size of businesses: those countries whose business fabric is made up of large companies with a presence in different international markets will be able to emerge from the crisis sooner than those with a more vulnerable business fabric and which are mainly recipients of foreign investment.

The type of activities will also be a differentiating factor; demand continues to consume, but its preferences have changed. Social distancing, health concerns, the incorporation of teleworking into the daily routine and many other social changes have led to the effervescence of many economic sectors, while others have suffered a debacle that will be difficult to resolve in the short term.

All of the above has created a new game board that has been built on inequality and asymmetry, but which, in turn, opens up a whole range of opportunities which, together with the existence of a forthcoming mass vaccination, will be the two pillars that will undoubtedly enable the expected economic recovery to be achieved.

The enormous amount of financial resources available to invest in projects for the future will strengthen the capital of many companies, foster sector consolidations, promote mergers and acquisitions and facilitate strategic alliances in many sectors.

Changes in demand make it an ideal time to look for new market niches, seek new ways of selling, test new marketing trends, rethink mature products and their formats, look for efficiencies in processes and analyse margins.

It is time to look at new businesses and start-ups, for corporations to work as accelerators of innovation, seeking collaboration and alliances with start-ups.

It is necessary to fully embrace digitalisation and the opportunities that blockchain technology brings in terms of traceability, efficiency and improved margins. In short, these are times of transformation and, above all, of strategic reflection in order to discover the opportunities that each and every one of our companies has within our reach.