Towards the end of last year, several economists, strategists and political leaders were talking of the big recovery post-pandemic which would tap into 2.5 years of pent-up demand. I, myself, also forecasted a strong V-shape recovery for 2022. What many of us never anticipated was that on the back of the pandemic, a full-scale invasion of Ukraine would take place by the nuclear power Russia.
As a result, the global economy has been hit with ‘abnormal’ elevated inflation rates, supply chain shocks/disruptions and political uncertainty. All this negativity feeds into the economy and strangles the expected 2022 big recovery.
To make matters worse, we still have militant COVID extremists, arguing against the lifting of COVID-19-related restrictions and demanding a return to the pandemic heydays. Moreover, travel restrictions remain in place, even if the government belatedly aligned them this month with the EU regulations of July 2021 (better late than never I guess).
As a business owner, senior manager or board director, we live in truly uncertain times, where the level of residual uncertainty is the highest I have seen it in my lifetime and getting strategic business decisions right is proving to be extremely hard. If you do nothing (wait-and-see), you risk being overtaken or outflanked by the competition; if you bet on the ‘big recovery’, you risk a lot should geopolitical factors escalate and deteriorate; and finally, if you hesitate and cautiously wait, you almost lose out no matter what the outcome! I have a lot of empathy with people owning or managing a business right now, since it truly is an almost impossible time to get big business decisions right.
Fitch Ratings, for example, has cut its world GDP growth forecast for 2022 by 0.7pp to 3.5 per cent, with the eurozone cut by 1.5pp to 3.0 per cent and the US by 0.2pp to 3.5 per cent. In fact, Fitch has lowered its forecast for world growth in 2023 by 0.2pp to 2.8 per cent.
Meanwhile, the OECD estimates global economic growth could be more than one per cent lower this year than was projected before the Ukraine invasion and inflation could be higher by at least a further 2.5 per cent on aggregate (keep in mind original forecasts were already high).
The pandemic, inflation, energy prices, supply chain disruption, war, and food production disruption, all raise the level of residual uncertainty to true ambiguity. By this I mean that strategic analysis cannot even identify a range of potential future outcomes; the uncertainty fog is too thick right now.
The only aspiration we have, therefore, is that the government continues to stoke business confidence and pray that the collateral damage from the Ukraine crisis remains contained, and that it resolves itself quickly.
What we definitely do not need is more uncertainty from the militant COVID extremists. We have enough residual uncertainty from external factors which could derail our economic recovery this year, so the least we can do is get our house in order.
By this, I mean a commitment by the government to the permanent lifting of public health restrictions before summer so as to keep up with the constantly evolving epidemiological (improving) situation; to pause for just a while on climate change reforms, especially those that have a significant impact on business; to sprinkle a strong dose of practicality and realism on banks’ ‘due diligence’ of their customers, especially business operators; and last but not least, for the government to almost exclusively focus on economic growth and employment for the next 3+ years, just like it did on COVID during 2020-2021.
Let us actually replace the COVID daily reports with daily positive economic data, number of new jobs created and foreign direct investment, incoming tourism numbers, etc, all of which show a constantly improving financial and economic situation. We need this type of intense focus, so as to cultivate hope.
I say this not to discount or disrespect the other issues, as important as some of them may be, but right now we need to believe that our future will be better and that we have the power to make it so. This is crucial for our motivation, health and performance as a country.
Sure the price of bread and other basics will go up or the affordability of our water and electricity bills is worrying. Sure the war in Ukraine could so easily bring into action NATO countries which is dangerous for world order. Sure the fact we are not self-sufficient as an island means we are more exposed to external shocks and shortfalls. But we need to focus on factors where we are in control, and this means removing or even eliminating all the internal negativity.
I urge the leaders of our country - political, social and economic - therefore to invest in a dash of hope. We need this to ensure business confidence remains high and the levels of uncertainty brought down to manageable levels. Failure to do so will quickly mean that 2022 turns out to be a continuation of 2020/21.
A dash of hope please. Everyone. We really need it.