Mike Moffatt is an assistant professor at the Ivey Business School at Western University and senior director at the Smart Prosperity Institute. John McNally is a research associate at Smart Prosperity.
When dealing with the coronavirus, policy discussions have focused mostly on either weathering the short-term crisis or investing in the long-term recovery. However, the hardest problems that COVID-19 brings in the coming months will occur in the space between the two.Governments have been calling this in-between phase “the restart.” That implies getting back to normal is like flipping a switch. It isn’t. Public-health restrictions will remain until we have an available vaccine.
The biggest risks during the climb will vary for each business. Large companies with problematically high debt levels will be more vulnerable. New debt on balance sheets will also make it harder to borrow and will dent credit ratings. That will slow investment and hiring. Those impacts will ripple through supply chains.
This will not stop the forces of creative destruction. E-commerce now makes up 27 per cent of total retail sales in the United States after sitting at 16 per cent only eight weeks ago. Consumers and markets are adapting fast. Some of these changes won’t be reversed when this is over. This will hit sectors such as commercial real estate, services and entertainment especially hard, deepening their pain.
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