So far, no effective treatment has been found for Covid-19 infection, immunization through vaccination is a means of prevention and will take a long time until the global pandemic can be controlled.
High level of state’s expenditures and consumption of specific goods, services and medicines in health systems and for public safety can lead to increasing the level of taxes and duties, including custom duties. Certain goods and services will become more expensive and weigh more in the household budget.
These, together with declining incomes for some people due to the Covid-19 crisis, will have the effect of lower disposable income for many consumers/households which can result in reduction of consumer spending. A sudden change in consumer behavior due to restrictions and safety measures taken to prevent the spread of infections, such as lowering in transportation costs, lunching at work or in the city office’s apparels, giving up travels, vacations and entertainment etc. should also be considered. These have strongly influenced many businesses and fields of activity and the return will not be uniform and simultaneous but gradual, discontinuous and only on certain sectors of activity for the next year, at least.
We should, also look at the unprecedented level of liquidity in the financial system. This could create problems for the attractiveness of savings products, on the one hand, and the quality of credit products, on the other. This will result in an increase in risk appetite in search of a better return on financial investments, on the one hand, but possibly also more relaxed lending conditions, on the other hand, including for consumers, which could mean potential losses, higher over-indebtedness, non-performing loans and a slow financial recovery of households, possibly threatening the financial stability.
The pandemic has brought furloughs, technical unemployment and or layoffs for millions of citizens, and some jobs will be lost forever. Accelerated digitization and automation will make it difficult to find jobs in line with the qualifications and experience of job seekers, and professional conversion for the professions and trades of the future will be difficult or impossible for a large number of people. Social benefits will weigh heavily on public spending, along with pensions to be paid to an aging European population. In Europe, even before the pandemic, youth unemployment was high, and post-pandemic prospects will be even darker. The increase the level of poverty is a great threat to the economy. Economic difficulties, lowering the standard of living and higher unemployment rates may contribute to the already high level of social unrest and civil disorder.
Unpredictable fluctuations in prices for energy and other raw materials, disruption of supply chains due to the next waves of the pandemic, a massive decline in demand for some products and services can create uncertainty and unpredictability in business and will hinder the economy. We mustn’t overlook the dependence of Western industries on Asia, especially China and the lack of strategic vision to prevent future crises of a similar or different nature.
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