Post Covid 19 World

Possible effects of Covid-19

There is consensus among the experts, researchers, and academicians that the post-Covid-19 world will be quite different in several ways, and they posit the following post-Covid-19 scenarios.

Digital World

The world is going to transform from actual to virtual behavior and this is especially true in the digital economy, where digital behaviors like remote working and learning, telemedicine, and delivery services are on the rise. For example, Mayo Clinic has successfully experimented with remotely managing hospital emergency rooms across the country since the coronavirus's initial outbreak, relieving pressure on systems that were not designed to handle the increased caseload. Furthermore, the pandemic's ongoing demands have advanced Mayo's strategic relationships with partners such as Google/Alphabet. Mayo Clinic is providing advanced virtual care with AI-enabled digital diagnostics and remote service delivery as data-driven medical innovation expands geometrically. Other structural changes, such as regionalization of supply chains and an increase in cross-border data flows, may also accelerate. Remote work is likely to become more common in the future. We found evidence that working from home is at least as productive as working in an office. The pandemic crisis has hastened the pace of digital transformation, with increased e-commerce and faster adoption of telemedicine, videoconferencing, online teaching, and fintech. Companies with global supply chains are experiencing shortages and bottlenecks. Many of these companies are likely to reshore (to move a business or part of a business that was based in a different country back to its original country) some of their production. Unfortunately, because the majority of production is likely to be automated, this trend will not create many jobs.

Impact on Financial Sector

Banks, by definition, are vulnerable during economic downturns, due to the possibility of nonperforming loans and, in extreme cases, bank runs. Researchers have developed a theoretical model that shows that the likelihood of a developing country's banking industry collapsing increases as the combined prevalence of large pandemics rises. During epidemics, much of the group lending microfinance institutions and banks to the poor will be pressured because the aggregate shock will pressure all group members. While there is little prior research on how epidemics, let alone pandemics, affect financial markets, some imperfect parallels are drawn from other types of natural disasters. Natural disasters such as earthquakes and volcanoes, as well as air disasters and, more recently, terrorist acts, cause market reactions. While COVID-19, for example, has been devastating to the airline industry around the world. COVID-19 clearly indicates a prior undervaluation of equity risk. Will this result in firms using less leverage? Will there be a long-term shift in equity costs? Following SARS, researchers discovered a 200-basis-point increase in the country's risk premium for China and Hong Kong. While the impact of country-risk premiums on equity costs will vary depending on firm exposure to various markets, an increase of two percentage points in a country risk premium (likely much higher for COVID-19) would result in a significant increase in equity capital costs, with an associated underfunding of global pensions. However, researchers suggest that increased country risk for China and Hong Kong is based on China and Hong Kong being high-risk areas for SARS. However, in the case of a true pandemic, such as COVID-19, the exposure is global rather than limited to a few countries.

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