COVID-19 and the Return to "Normal"
COVID-19 has upended life as we know it. COVID-19 will undoubtedly be the biggest story of 2020, and quite possibly, the biggest story of the entire decade. Despite the negative news, with some confidence, we can anticipate that a vaccine will be developed and distributed by the end 2021 (hopefully sooner). At that point, we can expect life to return to normal, with the need to social distance completely removed. We expect that post vaccine life in 2021 will greatly resemble life in 2019. The extreme and necessary measures we are taking to control COVID-19 will largely be confined to 2020.
However, for the time being, life globally is centred around virus containment efforts. In Canada and in many other countries, governments have stepped in to provide the essentials of shelter, food and medicine for large swathes of the population. Those that are in essential services continue to work, with increased safeguarding measures. Those that are able to, work from home for the time being. Children are not expected to return to school for many months. At ACS Group, we anticipate that we will continue to operate on the self-isolation > quarantine > social distancing spectrum for many months yet. However, in the not too distant future, we will return to pre- COVID-19 life. Humans tend to have short collective memories.
As we emerge from COVID-19, there is a very strong likelihood that Canada and other countries will be experiencing economic recession. As governments step back from providing emergency support programs related to COVID-19, the economy and society will need to begin a typical recovery from a recession. Government has a role in shaping this recovery, as do small and large businesses.
There are certain things we can predict that happen as societies emerge from recessions. For one, we can anticipate that an economic expansion will involve a greater consumption of energy as production increases. We would expect that the price of energy will increase as demand increases, be it electricity, oil or gas. We also anticipate that the savings rate will increase immediately following the recession, as individuals still have the stress of the recent cash crunch fresh in their mind. As time progresses, and the economy moves through expansion, this savings rate will drop, as the memory of the recession fades. Humans tend to have short collective memories.
We do anticipate that we will return to pre- COVID-19 life, with 2020 being an outlier. Outside of certain outcomes that are typical of emergence from a recessions, such as the ones listed above, we anticipate that COVID-19 may bring about certain behavioural changes once life returns to “normal”.
1. The move to cashless transactions will be accelerated. With the strong recommendation against cash transactions currently in force, business have been forced to go cashless and holdout consumers will accelerate their move away from cash. This brings about a strong need to ensure that those in society that are “un-banked” and without access to cashless banking are supported through this transition.
2. There will be an increase in remote work, but not necessarily driven by office employees. At the end of a long period working remotely, the value of in person collaboration and the separation of home and work will be recognized by many. As such, we don’t anticipate a drastic shift away from office space. However, we do anticipate a change in server hardware, as most businesses that have not yet moved to cloud computing will prioritize doing so. In addition, many professions that were not being delivered remotely, such as healthcare and law will accelerate that transition. For example, online doctor visits have the potential to become common for a range of typical medical needs.
3. We will be much closer to finding equilibrium between online and bricks and mortar retail. Consumers will be happy to get back to bricks and mortar for a range of needs, depending on individual consumer preference. Conversely, many individual consumers who have been forced to adopt online shopping will transition and reduce bricks and mortar shopping. On the aggregate, we will be closer to finding the equilibrium between bricks and mortar and online, allowing large real estate firms more insight into the highest and best use of their properties.
4. Air travel for business purposes will be moderately impacted, mainly driven by decreased travel for internal organizational needs. Remote management of internal teams has been forced on organizations, so they can now evaluate the effectiveness and cost savings of doing this to manage geographically dispersed workforces. However, we still expect in-person meetings to be critical for building relationships between organizations. This will further be driven home by the near halting of deals and sales occurring during the COVID-19 emergency response. For that reason, we don’t expect to see material changes in the conduct of conferences, sales calls, and meetings between organizations.
5. The next five years of the energy transformation will be driven increasingly by government, not consumer, priorities. During the COVID-19 response and immediately afterwards, society will navigate a transition to increased remote work, coupled with lower energy consumption during the COVID-19 response. During the COVID-19 recession and immediately afterwards, energy should be relatively cheap as the new level of global demand is established. Government programs will be used to incent consumers towards the energy sources they prioritize, as consumers on the whole will be price conscious.
6. Global cooperation will increase during the COVID-19 emergency and immediately following, but will return to prior levels as a vaccine rolls out. This emergency has forced people to recognize that there are no borders for planet wide issues. The actions of one country directly affect the actions of another, so despite game theory dictating otherwise, cooperation is in the best interest to resolve COVID-19. This may appear contrary to the surge in national self-interest occurring now, but as the initial shock subsides and things stabilize in individual countries, the need to address the spread of the virus on a global scale will be even more apparent. However, once the light at the end of the tunnel is more visible, self-interest among nations returns and the balance between cooperation and competition will move to prior levels. As such, we don’t expect large system changes at the global level, particularly with regard to financial systems.