KUALA LUMPUR: Developing contingency strategies and response are crucial for businesses amid the global economic slowdown due to Covid-19, according to Deloitte Malaysia’s life sciences and health care leader Cheryl Khor.
A good plan will help businesses protect their assets, safeguard employees, communicate better with customers and minimise interruption.
Due to uncertainties arising from the coronavirus outbreak, entrepreneurs find it difficult to predict their business and industry growth, either in short or long term, she said.
“There is much we cannot know such as how fast the virus will spread, how successful China’s government will be in fighting the outbreak, how policymakers will respond and how ordinary citizens will adjust their behaviour?
“So, for businesses, it is probably best to plan for the worst and be pleasantly surprised if it does not transpire,” she Bernama in an interview today.
Meanwhile, Khor said the 2002/03 Severe Acute Respiratory Syndrome (SARS) outbreaks offered valuable lessons, especially in terms of its similar effect on economic growth.
During that time, China’s gross domestic product (GDP) dropped during the second quarter of 2003 but it was offset by a sharp acceleration in growth after the virus was contained in the following two quarters.
“There was a need to satisfy the excess demand that built up during the outbreak which the economy was effectively on hold,” she explained, adding that it was difficult to spot the SARS’ effect on China’s annual economic growth data during the first decade of this century.
“Only when you examine quarterly data do you see an impact, one that was quickly reversed,” she added.
Returning to the Covid-19 outbreak which originated from Wuhan in China, Khor believed some of the declines experienced in consumer spending at stores will likely be offset by more online shopping.
Similarly, some of the cancelled holidays will take place later as consumers are likely to have set aside money for that purpose and some of the lost production at factories will be made up in order to meet pent up demand, she said.
In the short term, Khor said the disruption experienced by Chinese factory production and distribution has impacted the supply chains of neighbouring countries.
“This could mean trouble for factories in Southeast Asia-including Malaysia, Korea, and Japan as well as for mines and farms in countries like Australia and Indonesia,” she said.
As commodity prices have fallen sharply recently, this according to Khor, will make it more difficult for China to meet the import targets agreed by the US-China “Phase One” trade deal.
In the tourism sector, Chinese tourists she said, play an important role in the economies of several Asian countries, especially Thailand and their absence are expected to cause a slowdown in growth.
In addition, there are many global companies that depend strongly on sales in China and the Covid-19 outbreak has caused problems for many of these companies which have seen their share prices fell sharply.
Khor also said the financial markets have also taken a beating, with equity prices weakening in response to the health crisis. – Bernama
