What economic lessons will the world learn from Covid-19?

London (CNN Business)A prolonged recession is the biggest worry for company executives as they contemplate the fallout from the coronavirus pandemic. But there’s plenty more keeping them awake at night.

Executives whose job it is to identify risks are also concerned about a related surge in bankruptcies, high levels of youth unemployment and increased cyber attacks arising from a shift to remote working, according to a report by the World Economic Forum (WEF), Marsh & McLennan and Zurich Insurance Group.
The authors surveyed nearly 350 senior risk professionals from large companies around the world. According to the report, published on Tuesday, two thirds of respondents listed a protracted global recession as the “most worrisome” risk facing their companies. The report’s authors also flagged increased inequality, a weakening of climate commitments and the misuse of technology as risks arising from the Covid-19 pandemic.

    The survey was conducted in the first two weeks of April.
    Policymakers around the world are now seeking to haul their economies out of coronavirus-induced slumps, reopening businesses, schools and transport, while limiting the risk of a second wave of infections that could force new shutdowns.

    The International Monetary Fund said last month that it expects global GDP will contract by 3% in 2020, the economy’s deepest slump since the Great Depression of the 1930s.
    “Covid-19 diminished economic activity, required trillions of dollars in response packages and is likely to cause structural shifts in the global economy going forward, as countries plan for recovery and revival,” said the authors of the WEF report.
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    “A build-up of debt is likely to burden government budgets and corporate balances for many years… emerging economies are at risk of submerging into a deeper crisis, while businesses could face increasingly adverse consumption, production and competition patterns,” they added, pointing towards executives’ concerns of widespread bankruptcies and industry consolidation.
    The IMF expects government debt in developed economies to increase to 122% of GDP this year from 105% in 2019. A weakening of fiscal positions in major economies was a worry for 40% of the executives surveyed, with the report’s authors suggesting that today’s spending could lead to a new age of austerity or tax hikes.
    When asked about their top concerns for the world, those surveyed mentioned high levels of structural unemployment, especially among young people, and another global outbreak of Covid-19 or a different infectious disease.
    “The pandemic will have long-lasting effects, as high unemployment affects consumer confidence, inequality and well-being, and challenges the efficacy of social protection systems,” Peter Giger, chief risk officer at Zurich said in a statement.
    “With significant pressures on employment and education — over 1.6 billion students have missed out on schooling during the pandemic — we are facing the risk of another lost generation. Decisions taken now will determine how these risks or opportunities play out,” he added.
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    While the solidarity created by the coronavirus pandemic offers the possibility of “building more cohesive, inclusive and equal societies,” according to the report’s authors, social instability arising from increased inequality and unemployment is an emerging risk facing global economies.
    “The rise of remote work for high-skilled workers is likely to further create labor market imbalances and a growing premium for those with the most mobile skills,” they said.
    There is already evidence to show that low-income and migrant workers are bearing the brunt of the economic fallout from lockdown measures.

      The report also finds that progress on environmental commitments could stall. While new working practices and attitudes towards traveling may make it easier to ensure a lower carbon recovery, “omitting sustainability criteria in recovery efforts or returning to an emissions intensive global economy” risks hampering the transition to cleaner energy, said the authors.
      They caution that greater dependence on technology and the rapid roll-out of new solutions, such as contact tracing, could “challenge the relationship between technology and governance,” with lasting effects on society from mistrust or misuse.
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