US President-elect Joe Biden may have promised a “return to normalcy,” but the truth is that there is no going back. The world is changing in fundamental ways, and the actions the world takes in the next few years will be critical to lay the groundwork for a sustainable, secure, and prosperous future.
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CAMBRIDGE – Let’s be optimistic and assume that one or more of the 11 COVID-19 vaccines currently undergoing Phase 3 clinical trials are found to be safe and effective by early 2021. Let us also assume that production can be ramped up quickly, so that countries can vaccinate a significant part of their populations by late next year.
In this rosy scenario, the current “special period,” when social distancing severely restricts economic activities – from schools to universities, restaurants to airlines, concerts to sports events, and religious ceremonies to wedding parties – will last only one more year. Once social-distancing measures are lifted, pent-up demand for celebrations, social gatherings, travel, and the joys of human interaction will likely fuel strong recoveries.
But for many firms that already have endured six months of pandemic-induced disruption, one year seems far away. Firms able to survive until then – especially in emerging markets – will have a bright future but weak balance sheets. They will have experienced 18 months of negative cash flows in which their equity will have largely evaporated.
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