The second wave of the virus in business and the economy: they named the sectors that would hit the hardest

Investor panic

Alexander Izgorodin, economic adviser at SME Finance, summed up the economic performance of the first wave of the virus in Delfi 11, saying that gross domestic product had fallen by almost 4%, but said the result was likely to be one of the best in Europe.

According to him, most of the surprises were provided by domestic consumption in general, as the indicators were already positive in May, but not without negative things.

“One of the negative surprises was business financing. If we look at the data from the European Central Bank (ECB), in April, May and June Lithuania was the last stable among the euro zone countries in this regard.

Suppose that bank loans to businesses fell 9 percent year-on-year in April, compared with 7 percent in the euro zone. increase. “This is one of the aspects in which we are radically different from other countries in a negative context,” said the economist.

Speaking about possible scenarios for the second wave of the virus, A. Izgorodin explained that, in his opinion, Lithuania will not monitor changes in the V or L-shaped economy, but W.

“We are already seeing the growth of new cases in Lithuania and around the world, and already in July our Department of Statistics surveyed the population and said that consumer expectations had not increased in practice, so I think that it will be a problem. ” If the number of COVID-19 cases increases, both companies and individuals will start to be more cautious, spending less money on non-essential goods, in which case in October-December we can see a slightly worse economic performance than in the third quarter. . Third quarter I think it won’t be bad, but for the fourth quarter. I have some questions, ”he said.

The economist also noted that today’s business is not fully recovered either. It deals with both industry and certain sectors of the domestic market, for example, jewelry, textiles, restaurants. Also more than a thousand. Today’s businesses are still inactive.

True, the economist said that not only entrepreneurs, but also investors are preparing for the second wave today, because this can be seen in investments in gold.

“The price of gold is breaking records. This is a sign that investors are looking for safer asset classes, and when that happens it shows that there is a certain amount of panic among investors because we don’t know what we are struggling with. This “It’s what you see in the markets. As soon as the second jump in cases in the world started, you can see some anxiety in the markets,” he said.

When asked how the second wave would affect the Lithuanian economy, he said that the main problem would probably be related to consumer expectations.

“If people see a lot of negative information in the public space, they will say that they are preparing for the second crisis, they will spend less money on textiles, restaurants, jewelry, which automatically means less consumption and the economy will contract.”

So, companies will analyze their turnover, they will start saving, investing less, banks will no longer lend. <..> The typical spiral of the crisis will ignite ”, said the economist.

However, according to A. Izgorodin, even if such a scenario were to materialize, the Lithuanian economy would withstand the second wave.

“I don’t think there is a crisis as big as the one we saw 10 years ago. I think the economy would contract like now, around 4-5 percent. I’m not predicting drama, but the fact that the economy will fall a little,” said.

The industry would resist the blow

Vidmantas Janulevičius, President of the Lithuanian Confederation of Industrialists (LPK), said that industrial companies already employ 93% to 95% today. capacity, approximately 5-7% more is left in downtime. workers, but in general the situation in the sector seems good. However, according to him, whatever the situation, today the business is preparing intensively for the second wave of the virus.

“The fact that everyone learned from that first wave that you have to take precautions means that most have masks, suits, boots and everything else.

We even made centralized purchases with the help of industrialists, finding suppliers and merging into larger groups so we could buy the same security product cheaper. The essential are educational activities, because we understand that if an employee gets sick, the entire industry can be eliminated, education is one of the priorities.

The second thing that can still be done is to try to accumulate a financial reserve, because we all understand that 32.5 percent. The recession in the world’s largest economy cannot but lead to a recession in our country as well. It is only a matter of time before the Atlantic wave is always late. In 2008 we didn’t see signs of a fall in September either, but in December everything was different, “he said.

When asked if business failures were avoided during the first wave of the virus, he said it was inevitable.

“I think small businesses went bankrupt more, not believing in a quick recovery, and the doctrine was how bad things are here. Today we see a lot of empty rental space <...>.

I think that was the first reaction that everyone feared and began to close down those companies, it is the construction and services sector ”, he said.

In conclusion, the president of LPK assured that he believed that the country’s industry would really resist the second wave of the virus, if it did so.

“The depth of it will depend on the number of diseases, access to capital and, of course, the exterior of our partners,” he said.

True, A. Izgorodin pointed out that when it comes to bankruptcies, the situation may be different.

“If the stimulus measures come to an end and there is no second wave, we can see a bigger jump in bankruptcies, although the economy will recover,” said the economist.

It will hit the tourism sector

The Deputy Minister of Economy and Innovation, Jekaterina Rojaka, told Delfi that, in addition to that, it must be recognized that this summer is far from being a party, but rather a preparation for the second wave.

“I think preparing for the second wave is about finding a balance between economics and health.

I don’t think the second wave is as deep as the first. It is not yet clear whether the quarantine could be as complete as it is this spring. What you should focus on is not hindering companies as much as possible, ”he said on the show.

Mr. Rojaka also emphasized that the impact of the second wave on business would probably also be uneven, with the sectors most affected by tourism being the most affected.

“If in the past all retail trade has been interrupted and in part wholesale, then the second wave will affect those sectors that have a negative long-term slope, it is tourism.

The impact on tourism is likely not to affect the indicators for next year until the end of this year. The same happens with exports, ”he said.