The coronavirus crisis turned the global economy into the deepest recession since the Great Depression mostly felt throughout 2020.
With estimates that world gross domestic product (GDP) had fallen by 3.9% in the first quarter of 2020. Major economies such as the US experienced more than 36 Million people filing for unemployment and experiencing a post-war record rate of 14.7%.
There is no doubt that the coronavirus is to blame for this crisis. But it can also be seen as a catalyst for a deeper crisis that existed before the pandemic struck.
The global economy had been on a downward trajectory for some time, even before the virus hit, thanks to a confluence of factors including rising inequality and sluggish productivity growth.
Currently, the turmoil in Eastern Europe has increased fuel and grain prices globally causing a knock-on effect of increased inflation throughout the globe.
With the economic winter that we are currently facing, many of us have been hit hard.
We are working much less and some may have lost their jobs.
Many people will fall into a depression, which is understandable. But there are ways to fight it…
WHY IS IT SO BAD?
The 2008 recession was the biggest economic crisis post-World War II until COVID. It led to a slump in the stock markets and a collapse of real estate prices.
The world economy shrank from $60 trillion to $51 trillion as a result of the crisis. Millions of people lost their jobs and homes during this period, particularly in Europe and America.
The coronavirus pandemic & war in eastern Europe has the potential to be far more devastating to most people, with the effects powerful enough to leave their mark far into the future.
An unprecedented wave of furloughs, layoffs, and pay cuts, has quickly ushered in an economic winter that seems unlikely to end anytime soon.
Hong Kong, despite being the tenth largest trading power and 3rd-largest financial center in the world, is suffering an economic winter. This is due to the combined impact of the COVID-19 outbreak and slowing Chinese economy, the trade war with the United States, decreased foreign investments, and tight credit conditions forcing the Hong Kong Monetary Authority to increase interest rates.
The Hong Kong General Chamber of Commerce forecast in mid-February that local retail sales would shrink by 2% this year, compared with a forecast of 5% growth at the end of last year; the unemployment rate was revised upward from 3.7% to 4.8%; merchandise exports grew by 6%, down 1 percentage point from the original forecast.
WHAT CAN WE DO?
If there’s a downturn, it makes sense to have an emergency financial plan in place. But companies with great products and services that customers value also have a good chance of thriving in any economic climate, said Philip Evans, a senior partner at BCG who advises executives on strategy. “Businesses that provide fantastic value to their customers don’t necessarily go away when things get tough,” he said.
Evans pointed to Apple as an example of a company that has excelled financially even during past periods of economic weakness. “Apple is not just about selling you stuff, but about the experience of using the stuff — the joy and pleasure of all these different devices working together. That’s what people pay for,” he said. The same goes for other successful brands such as Disney and Amazon — they offer experiences customers love and are willing to pay for regardless of the economic climate.
Whenever there is a crisis, people lose money, and sometimes they even lose their homes. However, this is also the time when many successful people amass fortunes.
Why? Because the media and the general public are always focused on the bad news. The media exploits negative stories because this is what attracts their viewers.
For example, when stocks go down 30%, most news outlets will focus on the “horror” stories of how people lost everything in the stock market.
But here’s the thing: whenever stocks go down 10%, 20%, or 30% it means that they are on sale. In other words, if we had $100,000 to invest and we buy $100,000 worth of stocks that we believe will be good investments over time, then our money will grow. But if we wait until stocks go down 30%, then we can buy $140,000 worth of those same stocks for $100,000!
THAT IS AN OPPORTUNITY!
Netflix innovated ways to continue to appeal to its audience during the 2008 recession. It was during these times that the brand introduced a new product (the streaming service) and continued to grow subscribers and memberships. They were able to survive the recession because of their innovative strategies.
The current COVID-19 pandemic in Hong Kong has led to the permanent or temporary closure of many stores, but the local popular lifestyle chain AbouThai is going against the tide with the launch of a convenience store concept recently. They opened their first convenience store in the Causeway Bay central area in early March.
The chain — which has 24 department stores across the city, mostly in shopping malls, selling snacks, and personal care and lifestyle products from Thailand — is actively developing street shops and seeking investors, and invites Hong Kong people in related industries to join. AbouThai also revealed that it will soon issue a franchise so that everyone in the city has the opportunity to become a part of the group. In just 5 days, more than 3,000 inquiries were received about the franchise.
Why do they have the guts to expand in this economic winter? It is because they understand that Hong Kong people need to buy a lot of daily food for stockpiling during the outbreak to cope with the sudden need for isolation at home or the upcoming universal testing. They see this as an opportunity to expand against the market.
And so there we have it: the three basic steps to surviving an economic winter, or better yet, thriving!
First, prepare for the unavoidable. While we can’t predict when an economic winter will come, we know that it will come at some point. So be prepared and have a financial plan.
Second, look for opportunities that others may not see.
And third, focus on the things we can control. If we feel like we don’t have a lot of control over our current situation, then be creative and think of ways to change it.
There’s always going to be someone who sees the glass as half full while others see it as half empty. Those who see opportunity in tough times are the ones who will survive and thrive in them.
The Destiny Team