In this battle, the enemy is invisible. Around the globe, a tiny virus has brought human devastation, wreaked economic havoc, and confronted governments with a challenge unlike any seen in recent history. Thankfully, the pandemic has begun to recede in some areas—at least for now—and governments are beginning to navigate what promises to be a long and complex recovery.
Until a vaccine or cure is found, governments will need to balance health risks with economic impacts. Reopening the economy in this new environment will require an entirely new role for governments, as they become responsible for monitoring the prevalence of COVID-19 across multiple regions and communicating with individuals and businesses alike about what activities are permissible in which locations.
Governments have endured many economic downturns in the past, but they have never had to manage a recovery like this before. Realizing a brighter future will require government leaders to effectively navigate new challenges across multiple fronts.
Monitoring health status to drive economic recovery
Everyone is eager to see the economy open, but no one wants to see COVID-19 cases spike back up. As economic activity increases, more people will gather in groups to work, travel, and shop—which increases the risk of spreading the virus. Government’s new role is calibrating the level of economic activity allowed and closely monitoring the status of the disease to identify future flare-ups.
There are a range of potential milestones governments can review to help guide the reopening of economies. Critical criteria would naturally include evidence that the number of cases is declining across geographies, which will be aided by the wide-spread availability of testing. But governments may also want to ensure a certain level of public health preparedness, making sure hospitals have sufficient capacity and necessary supplies in case of a resurgence of the virus.
Achieving these milestones will require government leadership and investment, such as fast-tracking the availability of testing, promoting research for a vaccine, and standing up a contact tracing program.
Government has a new, unprecedented role in this recovery: to continuously monitor public health by region to understand exactly how much economic activity can be tolerated before risking renewed outbreaks of the disease.
Promoting economic health
The act of reopening will most likely not be enough to bring economies back to pre-pandemic status. Many businesses won’t have the wherewithal to simply pick up where they left off. Some laid off workers will need public assistance, and others may need new skills to find work in the “new normal.” Governments will have to play a major role in bringing about renewed economic health.
Governments can use their broad powers and resources to foster business growth. While most governments have already provided a variety of immediate support to businesses and individuals (see Deloitte’s COVID-19 Government Response Portal for details), continued assistance for distressed businesses will be needed. Governments can also minimize further loss in employment by taking actions to promote job creation, stimulate the economy with strategic spending, and match displaced workers to in-demand sectors. A focus on reskilling will be critical to help workers displaced by business disruptions caused by COVID-19. These actions can encourage and support individuals and businesses to resume personal spending and business investment to re-start the economic “engine” of the region.
The unique challenges of partially reopening the economy
Even with benchmarks in place to monitor the health care recovery, the phased reopening of the economy will be challenging. Some regions will be safer than others, some activities will be safer than others, and some activities—food production and distribution, for example—are so essential that they will need to reopen sooner rather than later, even if they entail some risk.
Most governments are taking a phased approach to reopening. Many are requiring modifications to or new rules for operations, such as introducing capacity limitations, requiring masks be worn by employees and customers, requiring frequent cleanings and myriad other steps to make economic activity less prone to spread infection. Defining and enforcing these guidelines won’t be easy. At times, it may even be necessary to revert to more restrictive measures—and governments need to prepare their citizens for that possibility.
Confidence is key
The specter of COVID-19 and its health implications will haunt any economic recovery. Even if governments go “full throttle” and do away with all economic restrictions, the economic recovery may still be muted as long as the virus continues to pose a health threat. If people are too uncertain about their health and safety to go back to work or school, or to shop or dine out, they will simply stay home—and the economic recovery will stall.
Governments can provide reliable guidance on the path to recovery. Consistent, trustworthy communication will be key as citizen concerns and confidence must be part of the terrain of any recovery.
Reopening the economy and guiding the recovery may be one of the most significant activities governments will ever undertake. As they do so, relying on data can guide better decision-making. Milestones and metrics can signal key steps, and governments can use stimulus to support and revive their economies. But ultimately, political leadership will be critical for what looks to be a long and challenging journey.
Michael is a Financial Advisory partner and leads Deloitte Ireland’s debt advisory practice focusing on real estate and infrastructure financing. He is the Global Financial Advisory Public Sector Leader and the Infrastructure & Capital Projects EMEA Leader. Michael is also Head of Energy, Resources & Industrials for Deloitte Ireland and the China Services Group Ireland Leader. He specialises in advising public, private and banking clients on debt raising, restructuring, and refinancing for both project finance and corporate debt transactions including the development of government and infrastructure assets, real estate, energy and renewable energy assets in Ireland and internationally. Michael is a member of the United Nations Economic Commission for Europe (UNECE) PPP Business Advisory Board and the International Project Finance Association (IPFA) Ireland Council member.
Mike Canning, principal, Deloitte Consulting LLP, leads Deloitte’s Government & Public Services (GPS) Industry. GPS includes nearly 15,000 practitioners, providing consulting, risk and financial advisory services to 47 states, cabinet-level agencies in the U.S. government as well as at higher education and non-profit organizations. Mike specializes in helping health plan organizations solve major issues including strategic planning, merger and acquisition activities, business transformations and implementation of large-scale projects. Mike currently serves on Deloitte’s Board of Directors. Prior to his role as GPS Leader, Mike was the Global Clients Leader for Global Clients & Industries, where he oversaw efforts to ensure Deloitte member firms consistently deliver exceptional quality and the best of Deloitte’s broad portfolio of services to clients around the globe. Mike has also led one of the firm’s largest and most complex clients. In his tenure, Mike has served as chair of Deloitte’s Global Committee and as a member of its Strategy and Governance Committee on the Board of Directors. He has also served as Deloitte’s Global Consulting Managing Director of Services, the National Managing Director of Deloitte Consulting’s US Strategy & Operations practice, and the Strategy & Transformation Leader for US Consulting. Mike was a member of the USI Consulting board from 2010 – 2012 and on the China Consulting board from 2012 – 2015. Mike has over 30 years of experience with the firm, starting as a research analyst in Deloitte’s Detroit office in 1988. Mike serves on the boards of directors for New Profit and Celebrity Series of Boston. Mike holds a Bachelor of Arts from Oberlin College, a Bachelor of Music from Oberlin Conservatory of Music, as well as a Master in Business Administration from the University of Chicago. Mike and his wife reside in the Boston, Mass. area with their three children.