The economy of the 2020s – in times of pandemic

As the impact of Covid-19 continues to be felt, inevitably economic recovery and the resumption of business activity from this period of inactivity is going to take much longer than the estimates being released by many governments. Indexes released by supranational bodies such as the International Monetary Fund, OCDE and World Bank are reducing the growth projections established by many governments in the EU for example, reducing growth projections from Germany to Spain.

The best guess for a real bounce-back in the economy, if all goes according to plan – which these days is not a guarantee – would be expecting improvements from Q4 2021 or Q1 2022 onwards. In the meantime, there will be a slight improvement as the vaccination process evolves and restrictive measures to control the pandemic become more relaxed, which is something difficult to envisage if you look at the current infection rates which in some countries are over 1,000 cases per 100,000 inhabitants.

This does not allow for a general global estimate of the time the economy will take to recover, making it difficult to assess its outlook, even though there are some indicators that reflect how things are held on standby waiting for better times. One example of how the economy is constrained is looking at the levels of money available, despite the bad numbers of the banks. This is because the loan availability has been constrained and consumers have been prudent in not spending on items like cars, household appliances, business travelling, holidays entertainment and eating in restaurants. Savings are up high for many during 2020, which is no more than a “mirage” and does not take away from the reality of tens of millions of people facing unemployment and an increase in poverty.

The IMF has said that the bounce-back is going to be slow and will differ by hemisphere and country, with most countries reflecting a major growth in internet consumption, which also impacts the online gambling market, and the growth rate differs country by country, benefiting the stronger economies like the US or Germany.

Spending spree

Where will this money go? Primarily on what has been denied so far, such as business travelling, holidays, household items, entertainment, restaurants, and some will go on gambling, which represents just under 1% of the global economy. As the economy grows, so will the growth of gambling services. Gambling in all types of gaming halls will be big beneficiaries as well as sports betting which will grow as the live events fill with fans. Casinos and other gaming halls, both local and resort properties at destination hubs that combine gambling with vacation time and entertainment, will benefit from the growth of the economy when the health issue is more under control.

But do not get excited, that won’t happen all of a sudden or overnight, we have a winding road ahead during 2021, 2022 and 2023 for most economies, and probably up to 2025 for many other economies which will find themselves with huge debt and a slow pace in recuperating resources and consumer habits as they were in 2019, because consumer habits will experience a great change.

At a local level in Spain, things look very dark as it is a country that will have a longer recovery due to the structure of production with high dependence in small and individual entrepreneurs that have received practically no direct help or compensation from the government, lack of R&D investments, very dependable on services such as tourism and bars and restaurants completely out of business.

The situation is not the same in southern Europe as it is in the northern countries, being the first tourism receivers and the latter tourism providers. When that happens, it will not be the case that everyone will suddenly want everything, and create bottlenecks in supply, leading to higher prices and bigger margins of profit.

To the contrary, the recovery will have its own pace, depending of course on each country and economy, and a dispersed unequal recovery is expected. It will not be the same for all 27 EU countries, Latam and the rest of the world, and some will take longer than others to get back to business and allow the economy and consumers back to positive equalising figures.

Outside the EU, the US will also have a different growth and normalising pace being in control of the engine room of the economic measures necessary to push the economy and consumer pace.

All in all, it is expected that we are moving towards a more positive stage of the pandemic situation, with vaccines and medication now being rolled out.

Lessons to learn

Recovery will happen, this pandemic will eventually be medically offset (I dare to say that it will be defeated). We need to have the hope that the 2020s, as years evolve, will somehow benefit from this tragedy, if that can be said. Governments and institutions need to learn to be more efficient and more preventive rather than be reactive.

And what about our gambling and betting industry? Well, you can simply apply the same factors in order to reassess the business to be more prepared for situations like this as and, if they are repeated, making the business model more resilient with a more sustainable and better structured business strategy based on new technology, the Internet of Things, and basically consider online channels a necessity more than a complement to physical premises, in order to build a universal gambling and betting proposal to consumers under an omni-channel environment.

It is a must for the land-based industry to better survive in an evolving society and jump into the digital wagon as part of a multi-channel offer that will allow it to approach a wider and more compatible consumer profile, to be able to come out stronger and to be able to guarantee more stable and sustainable business performance.

Eduardo Morales-Hermo has worked as an executive in corporation management, product development and, for the last 10 years, as an adviser and consultant in the gaming industry, both in-person and via interactive channels.