The devastating socio-economic impact of the COVID-19 pandemic will be felt for years to come unless smart investments in economic, societal and climate resilience ensure a robust and sustainable recovery of the global economy, says the United Nations.
According to UN research, in 2020, the world economy shrank by 4.3 per cent, over two and a half times more than during the global financial crisis.
The modest recovery of 4.7 per cent expected in 2021 would barely offset the losses of 2020, as reported in the World Economic Situation and Prospects.
The Journal of Risk and Financial Management also uncovers how coronavirus has manifested consumer panic buying, herd mentality, changing discretionary spending and the role of the media in influencing behaviour.
Furthermore, contagion effects are likely increased through greater international media communication and access. Hence, JRFM anticipates that the COVID-19 crisis will not only see an increase in consumer fear, but also the broader repercussions of this fear and uncertainty in spending decisions.
Safe as houses
The key factors affecting real estate prices and availability are record-low interest rates and government incentives offsetting economic uncertainty. This in turn drives up housing demand but reduces supply.
The pandemic served to bolster the regional lifestyle exodus, which proved beneficial for local markets and industries.
Real estate prices often follow the cycles of the economy, but investors can mitigate this risk by buying REITs (real estate investment trusts) or other diversified holdings that are either not tied to economic cycles or that can withstand downturns, says Investopedia.
However, with 1.4 million Australians and a comparative number in New Zealand experiencing pandemic-related mortgage stress, discretionary spending has been altered by consumer priorities.
According to JP Morgan research, the products people mostly bought during the pandemic include household cleaning items and personal hygiene products; hair dye; vitamins and supplements; and coffee.
Double-digit product declines of 25 per cent or more were relegated to cosmetics and sun care. The prevailing work-from-home mindset and cancellation or postponement of travel plans put paid to the steep drops in these categories.
JP Morgan’s Head of European Food, Home and Personal Care Research, Celine Pannuti, indicates that these declines are cyclical. “… Some categories will find it very hard short term. They should come back, but discretionary products more closely linked to the economic cycle will be more impacted because they are generally not must-haves,” Ms Pannuti says.
Quality trumps quantity
The economic downturn in household budgets has also honed a collective approach to investing in quality over quantity. This trend has been enhanced or prompted by the pandemic’s harsher fiscal realities.
People are left with less money in their pocket, says Ms Pannuti, so stretching your dollar further with long-lasting purchase decisions is mandatory.
The rise in unemployment figures is also reinforcing stay-at-home trends. This will be reflected in spending patterns in the next 12 months or more.
“We could see some downtrading as consumers settle for more affordable options,” Ms Pannuti says, “although for now, we have seen consumers buying big brands and choosing household names overvalue or private-label products.”