Economic Impact of Covid-19
As New Zealand prepares to reduce its national alert level for Covid-19 from 4 to 3 starting tomorrow, New Zealanders might be heaving a sigh of relief that we are headed in the right direction. Undoubtedly, our Government and health agencies have done a sterling job, well supported by their teams. However the celebratory mood has to be sobered by the uncertainty surrounding the economic destruction that this virus is going to leave in its wake. The predictions by the pundits are apocalyptic, with levels of unemployment and financial losses being touted to be of the once-in-a-generation kind. Obviously NZ won't be alone in this dire situation; it will have many other countries keeping it company.
My concern for our country is the inherent fragility of a relatively small economy. Larger economies have many contributing sectors so while some sectors might be badly affected, others could keep the wheels of the economy turning. We do not have that luxury. Tourism and International Education have been massive contributors to New Zealand's GDP over the past few decades. These 2 sectors are going to be among the worst-hit in the aftermath of Covid-19. Farming, the other big player, is largely dependent on the vagaries of the weather. We will need some rapid thinking and action to replace these sectors with alternatives that can fill the breach. The billions of dollars spent in wage subsidies and health costs dealing with this virus would also have left a gaping hole in the country's coffers. The likely possibility of having our borders closed for a long period of time to ensure we do not lose the gains we have made during the last 5 weeks, means drastic reduction in international trade.
Prime Minster Jacinda Ardern and her team have been focussing totally on saving lives and rightly so, as there's no disputing the fact that people's lives have to take precedence over economy. Now that we seem to have headed off this virus at the pass, we need to quickly switch focus to repair the financial damage caused by Covid-19. The fact that we have a very capable and caring Government has just been on display over the past few weeks. The economic decisions taken over the next few months will determine just how successful we have truly been, as a country, in dealing with this unprecedented crisis.