The year 2020 started with fresh global optimism about the future of the economy, but the COVID-19 outbreak has disrupted industries, businesses and livelihoods, causing a sharp downturn. The global economy that grew 2.9 per cent in 2019 is now predicted to contract at least five per cent in 2020.
In our prognosis of the global economy, we highlight at least two macro changes that could happen when the pandemic ends. First, after decades of globalisation, it is likely that many countries have become more inward-looking as they seek to enhance their resilience against global crises. The COVID-19 pandemic has led to countries closing their borders and halting large-scale manufacturing activities, affecting global and regional supply chains. As a result, many countries are now seeking to expand their domestic production and to reduce their reliance on overseas suppliers so that any disruption to their supply chains can be resolved quickly.
Self-production and self-sufficiency will become more important, especially for strategic industries. In the event that a country is not able to produce domestically, it must diversify the sources of its imported supplies. Either approach or a combination of the two approaches will increase the cost of raw materials and supplies, but on the bright side, it will ensure the availability of alternative supplies during an emergency. Despite higher costs, production will be more stable should another global disruption occur in the future.
Enrico Tanuwidjaja is the Economist at UOB Indonesia. He joined UOB Indonesia in 2017 and is responsible for macroeconomic research focusing on Indonesia. Enrico writes on the Indonesian macroeconomic development and outlook as well as on the domestic financial market, giving insights for UOB's internal and external clients. Enrico is regularly featured in reputable news and business media, including writing opinion pieces. Follow him on LinkedIn
Find out how we can help your business expand across ASEAN Get in touch